07 December 2004	Tuesday	24 Shawwal 1425

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ISLAMABAD, Dec 6: The World Bank has finalized negotiations with the senior Pakistani officials to extend $300 million new soft loan for banking sector reform.

Informed sources told Dawn that the successful appraisal of the new banking sector reform programme has paved the way for the release of the $300 million loan in January 2005. This is the third banking sector loan being offered to Pakistan.

Earlier, the World Bank had offered $250 million and $300 million similar loans in 1997 and 2001 respectively. The World Bank and Pakistani officials met here again on Monday to discuss various formalities for the new loan programme.

The Bank's senior management has reportedly given a go ahead signal for the approval of the new banking sector reform programme. The sources said that primarily the loan amount will be used by the Pakistan Government for improving its balance of payment position.

The rupee component, however, will be used for introducing more reforms in the banking sector including speeding up the pace of privatization of remaining nationalized commercial banks (ncbs).

In this regard, the sources said, Pakistan government has been asked by the World Bank to finalize arrangement for the drastic disinvestment of the National Bank of Pakistan (NBP) by giving its treasury functions to some other reputed banks.

The sources said that the bank also wants Pakistan to take effective measures to end "Benami" accounts which refers to practice of holding property/assets in the name of one person for the benefit of other.

Historically, the practice is widespread in South Asia, reflecting deep-rooted cultural traditions. However, Benami is often aimed at concealing ownership of assets acquired through illegal means, defrauding creditors, and or evading payment of government fees, charges and taxes.

The bank, the sources said, regretted that the Pakistani courts have recognized this concept of Benami practice as a custom and enforced the intention of the parties.

The World Bank believes that Pakistan has been engaged in far-reaching reforms of the financial sector during the last five years. Considerable progress has been made, particularly with respect to banking sector. Regulations have been strengthened, loan recoveries increased and the quality of management improved.

Privatization of the three nationalized commercial banks what was termed as the "core of the government's reform strategy" is well advanced. The vision of the sector is for a market-oriented, predominantly private system that operates under a strong regulatory framework supported by an effective banking court system.

The bank has maintained close dialogue with the government on banking sector reforms following the banking sector adjustment loan in December 1997, through technical assistance to the central bank and preparation of financial sector update in 2000.