May 2, 2006	Tuesday	Rabi-us-Sani 3, 1427

Please Visit our Sponsor (Ads open in separate window).

ISLAMABAD, May 1: The World Bank has identified political, institutional and economic risks in releasing $300 million to Pakistan under the second phase of Poverty Reduction Support Credit (PRSC-II) that is aimed at maintaining per capita growth for an extended period of time.

Official documents available to Dawn reveal that risks to the country’s fiscal outlook due to expenditure pressures resulting from the October 8 earthquake and the $8.620 billion trade deficit are the main concerns of the bank.

The trade imbalance is more disturbing, it is increasing constantly due to rise in international oil prices and import of consumer goods, including sugar.

The loan was to be provided earlier this year, but negotiations between the government and the bank over the latter’s concerns delayed the process. Now the WB’s board is scheduled to approve the loan at its meeting on June 22.

The bank has pointed out implementation risks stemming from technical and institutional capacity constraints which need to be declined by strengthening institutions and building local capacity, an uphill task for the government.

The documents say the bank is working with the government to strengthen hazard risk management and capacity to minimize exposure to exogenous shocks and natural disasters, which are likely to hit repeatedly.

It is also working to mitigate political and security risks by sustaining and deepening its policy dialogue with stakeholders, supporting reforms and capacity building of key government institutions.

“While implementation delays can arise, the bank’s programme mitigates against this risk by disbursing against an agreed set of prior actions,” state the documents.

The PRSC-II will support implementation of Pakistan’s poverty reduction strategy. This strategy is summarized in the government’s 2003 Poverty Reduction Strategy Paper (PRSP).

The bank supported the first phase of implementation of the PRSP, which was approved by its board and disbursed in September 2004.

After the release of PRSC-II, the money will be spent on service delivery in education, health, and water and sanitation with the support of provincial and local governments. The PRSC programme focuses on those critical policy and institutional reforms that are in the domain of the federal government only.

Sub-national operations, such as those carried out by the Punjab education department and district peace committees in the NWFP and Sindh, will also be supported through the loan.

The WB’s assistance strategy to Pakistan is guided by its Country Assistance Strategy (CAS), discussed by its board on June 11. The bank is currently preparing a new CAS to cover financial year 2006-07, which is expected to be presented to its board in June. Elements of the draft CAS focus on three pillars aligned with strategic priorities of the government’s PRSP, including sustaining growth and improving competitiveness, improving government effectiveness and service delivery and improving lives and protecting the vulnerable.

The implementation of the PRSC’s ambitious, multi-sectoral reform programme requires effective coordination between government ministries and agencies, the bank has stressed. The PRSP secretariat in the ministry of finance will remain the focal point for the PRSC and will oversee the implementation of the reforms.

The secretariat also collects information from various sources, identifies information and data gaps and produces progress reports based on a set of indicators agreed upon by federal and provincial governments, as well as the international donor and domestic community.