ISLAMABAD: The government of Pakistan and the World Bank, on Tuesday, signed two programme loan agreements worth $800 million. The programmes include, the Pakistan Programme for Affordable and Clean Energy (PACE) and Second Securing Human Investments to Foster Transformation (SHIFT II).
Ministry of Economic Affairs Secretary, Noor Ahmed, and Melinda Good, acting country director, World Bank signed the two programmes loan agreements on behalf of their respective sides.
The World Bank’s Board of Executive Directors, Monday, approved $800 million in financing for two programmes in Pakistan — the Pakistan Programme for Affordable and Clean Energy and the Second Securing Human Investments to Foster Transformation.
According to official statement issued by the EAD, the signing of programmes indicates the trust of the International Financial Institution (IFI) on the government and will augment the government’s efforts to address the direct and indirect impact caused by the Covid-19 pandemic, strengthen the health and education systems essential for human capital accumulation, and reduce circular debt flow etc.
The WB will provide $800 million for key policy reforms in priority areas.
Second Securing Human Investments to Foster Transformation–Development Policy Financing (SHIFT-II) programme has worth $400 million. The development objectives of this WB-funded programme are to (i) strengthen Civil Registration and Vital Statistics, health and education systems essential for Human Capital (HC) accumulation; (ii) recognise the contribution of women to economic productivity; and (iii) improve national safety nets to respond to shocks in a more efficient manner. Programme for Affordable and Clean Energy – Development Policy Financing (PACE-DPF) programme has worth $400 million. The development objective of this programme is to reduce circular debt flow through reducing power generation costs, de-carbonizing the energy mix, improving efficiency in distribution and retargeting electricity subsides. Upon signing of the agreements, the WB will disburse $400 million immediately, while disbursement of another $400 million will follow in the coming days.
This financial support of $800 million under the said two programmes will also help in improving the balance of payment, and strengthening foreign exchange reserves.
The Ministry of Economic Affairs secretary thanked and appreciated the WB for extending timely support to the government at this difficult time when the country is facing increasing health-related and socioeconomic challenges amid Covid-19 pandemic.
He also highlighted that, even at time of prevailing difficult situation, the Government of Pakistan kept its focus on implementing structural reforms, so that the economy regains its strength.
The continued provision of budgetary support by the WB remains crucial in the implementation of structural reforms amid a global pandemic crisis.
Melinda, acting country director WB appreciated the reforms undertaken by the Government of Pakistan in the areas of energy sector and human capital development in difficult times.
She reiterated the commitment of the WB to continue to work together with the Government of Pakistan in the critical areas of the economy and achieving the objective of socio-economic development and poverty alleviation by upgrading the lives of millions of Pakistanis.
According to the WB, the $400 million PACE focuses on measures to improve the financial viability of the power sector and support the country’s transition to low-carbon energy.
The PACE prioritises actions needed to initiate critical power sector reforms focused on: reducing power generation costs; better targeting of subsidies and tariffs for consumers; and improving efficiencies in electricity distribution with the participation of the private sector.
Additional medium-term reforms are under development, focusing on subsidies, competitiveness, and power sector sustainability.
The goal is to reduce circular debt over the long-term.
“Power sector reforms are critical to resolving Pakistan’s fiscal challenges,” said Rikard Liden, WB Task Team Leader for the PACE programme.
“Decarbonizing the energy mix will reduce the dependence on fossil fuel imports and vulnerability to price fluctuations because of movement in exchange rates. PACE prioritises action on such reforms, which must be sustained to address circular debt and set the power sector on a sustainable path.”
The $400 million SHIFT II supports a federal structure to strengthen basic service delivery for human capital accumulation.
The programme will help improve health and education services, increase income-generation opportunities for the poor, and promote inclusive economic growth.
Strengthening services that build human capital in a coordinated manner between provincial and federal authorities, along with improved targeting of social safety nets, will better support families to recover from the Covid-19 crisis, and pave the way for more robust crisis preparedness in the future, said Tazeen Fasih, WB Task Team Leader for the SHIFT II programme.
The SHIFT II reforms increase budget reliability for sustainable financing of child immunisation and quality primary healthcare programmes, promote student attendance — especially for children who are out of school due to the Covid-related closures — and support data-driven decision-making.
The programme supports reforms to encourage women’s participation in the economy by improving working conditions and empowering those in the informal sector.
It supports the enhancement of national safety nets programmes and better targeting to protect the most vulnerable, building resilience to shocks such as the Covid-19 pandemic.
“The reforms underpinning PACE and SHIFT can contribute to facilitating sustainable investments and generate welfare gains for those most in need,” said Najy Benhassine, WB country director for Pakistan.