WB okays $500m loan to help govt fight Covid-19 effect

Updated May 23 2020

Email

Country will receive amount before current fiscal ends on June 30. — AFP/File
Country will receive amount before current fiscal ends on June 30. — AFP/File

ISLAMABAD: In a fast-moving process, the executive board of the World Bank has approved a $500 million loan to help Pakistan improve health and education facilities, generate jobs for women and strengthen social safety nets under its efforts to fight the impact of the Covid-19 pandemic.

The loan is set for quick disbursement and would be available to Pakistan well before the current fiscal year ends on June 30. The project will be financed by the International Development Association — a concessional window of the World Bank — and will have a 30-year maturity with a five-year grace period.

The concept papers of the project were cleared by the Central Development Working Party (CDWP) at a meeting presided over by the deputy chairman of the Planning Commission, Dr Jahanzeb Khan, early this week at the request of the finance ministry.

Pakistan has to meet a financing gap of $2 billion during the current fiscal, according to the International Monetary Fund estimates. Therefore, the finance division had presented seven concept papers for different loans from the World Bank and the Asian Development Bank for a total loan of about $1.8bn. All the papers were cleared by the CDWP.

The project “Securing Human Investments to Foster Transformation (SHIFT)” will contribute to improvements in the quality of civil registration and vital statistics, birth and death certification rates and the ability of the country to better plan for human capital accumulation.

Country will receive amount before current fiscal ends on June 30

The project seeks to implement in the country universal health coverage policy to improve health outcomes, increase sustainability of immunisation, better quality of education, boost engagement and recognition of women’s participation in economic activities, develop safety net programmes, expand education and nutrition initiatives and provide cash transfers to the poor and the vulnerable to cope with the potential negative impact of the fiscal adjustment and of the Covid-19 pandemic.

The document prepared for the project says macroeconomic risk in Pakistan is high as the impact of Covid-19 will weaken ongoing stabilisation efforts and medium-term structural reforms and add additional pandemic-related shocks.

In a statement, the World Bank said the SHIFT programme would support policy reforms to help Pakistan’s Covid-19 emergency response and protect human capital investments. It will support greater coordination between the provinces and the federal authorities to immunise millions of children and reduce their risks of contracting polio and other diseases. The SHIFT also improves targeted safety net programmes that will benefit 12m people impacted by the Covid-19 crisis, both at the federal and provincial levels.

“The global Covid-19 pandemic is impacting day-to-day life in Pakistan — not solely from economic disruptions but also additional stress on public services that jeopardise human capital accumulation,” said Illango Patchamuthu, World Bank’s country director for Pakistan. “This programme underscores the criticality of universal healthcare and social protection services that are durable to exogenous shocks such as Pakistan is facing now.”

The SHIFT supports three policy reforms aimed at building Pakistan’s workforce and improving social safety-net programmes, including to increase the quality of essential services, particularly primary healthcare and equitable access to basic education, and civil registration and vital statistics, recognise women’s economic contributions and support their participation in the labour force through appropriate working conditions, improve efficiencies in safety nets for Covid-19 response and strengthen effectiveness of national and federal safety net programmes in short- to medium term.

“Pakistan’s ability to mitigate socio-economic impacts of Covid-19 depends on how quickly and efficiently social safety net programmes can reach those most in need,” said Cristina Panasco Santos, task team leader for the programme. “This programme supports alignment efforts between Ehsaas and provincial safety net programmes to ensure that the most vulnerable and affected populations are identified and receive assistance.”

Besides the SHIFT loan, the CDWP has cleared six other project concept papers to avail about a total of $1.7bn worth of foreign loans. Of these, two papers would lead to preparation of projects to seek about $288m credit from the World Bank, including $100m for Solid Waste Emergency Efficiency Programme and $188m for Hydromet and Ecosystem Restoration Services project.

One of the concept papers pertains to $9m Korean assistance to set up a nutrition centre to improve child and community nutrition. Others include $75m project for pension reforms, $300m for financial markets development and $500m for resilient institutions for sustainable economy.

Pakistan’s total public debt to GDP ratio is already estimated to cross 90 per cent, significantly higher than 60pc debt to GDP ratio limit under the Fiscal Responsibility and Debt Limitation Act.

The World Bank said it had provided a total of $40bn to Pakistan since its membership in 1950. The World Bank’s programme in Pakistan is governed by the Country Partnership Strategy for FY2015-2020 with four priority areas of engagement, including energy, private sector development, inclusion and service delivery. The current portfolio has 46 projects with a net commitment of $9.1bn.

Published in Dawn, May 23rd, 2020