15 January 2005	Saturday	04 Zilhaj 1425

WASHINGTON, Jan 14: The World Bank has approved a $100 million credit and a $200 million loan for Pakistan to support the country's ongoing efforts at improving its banking sector.

In statement issued in Washington on Thursday evening the bank pointed out that a healthier financial sector was one of the key structural reforms that Pakistan had undertaken. The purpose of these reforms, according to the bank, was to reduce poverty by stimulating more equitable and inclusive growth for all its citizens.

"Pakistan has the most safe and sound banking system in South Asia due to far-reaching reforms in the financial sector during the last decade," said John Wall, World Bank's country director for Pakistan.

The $200 million from the International Bank for Reconstruction and Development is a fixed spread loan with an 8-year grace period and 20-year maturity. The credit, $100 million from the International Development Association, the World Bank's concessionary arm, carries a 0.75 service fee payable in 35 years including a 10-year grace period.

The banking sector in Pakistan has undergone fundamental changes through a Three-phased reform programme. The reforms managed to address the root cause of the sector's problems and achieved a complete turnaround in the environment for banking in the country.

With the privatization of two of the three Nationalized Commercial Banks, which accounted for nearly 25 per cent of the system and sale of Allied Bank Limited, nearly 80 per cent of the country's banking sector assets are now in private hands.

The proposed Banking Sector Development Policy Project supports the completion of the third phase of the reform process initiated by the government in the last decade. It will support the government towards improving sector governance and transparency through the privatization of the United Bank, Habib Bank and Allied Bank.

It will also support the development of an effective regulatory and supervisory capacity at the State Bank of Pakistan through changes in banking regulations; enhancing transparency through greater public disclosure; and preventing possible use of the banking system for money laundering.

"Pakistan's banking system has really gone through a sea change," says Mudassir Khan, a Senior Financial Sector Specialist with the World Bank. "This has been possible with the commitment of the government and the State Bank of Pakistan.

"Thanks to these reforms, the banking sector is more efficient and competitive and the access, quality and standards of services for the consumers have improved."

He said the World Bank would continue its support to see the transformation to a more equitable, transparent and a market-based system and the one that plays its due role in development.

Mushtaque Malik, the economic minister at the Embassy of Pakistan in Washington, signed the deal on behalf of the government of Pakistan. Mr Malik later told reporters that $65.30 million of this loan will be SDR. "The emphasis of the World Bank's assistance is to encourage banking sector privatization, which is already about 85 per cent in private sector," he said.

Mr Malik said that during the last three years banking sector in Pakistan had been doing very well and in recognition of this the US Treasury had requested Pakistan to help Egypt and Iraq in restructuring their financial institutions.

"The Governor of State Bank of Pakistan has already been declared as Governor of the Year in South Asia in recognition of his services in financial sector," he said.