ISLAMABAD: The World Bank’s board of executive directors on Tuesday approved $800 million in financing to Pakistan for reform policy programmes in energy and social sectors.

Soon after the approval, the two sides signed the loan agreements for quick disbursements.

Secretary of Ministry of Economic Affairs Noor Ahmed and the World Bank’s Acting Country Director Melinda Good signed the agreements on behalf of respective sides.

The ministry said the first loan pertains to the Second Securing Human Investments to Foster Transformation — Development Policy Financing (SHIFT-II) Programme worth $400m. The programme financing is aimed at strengthening civil registration and vital statistics, health and education systems essential for human capital accumulation and recognising the contribution of women to economic productivity.

The programme seeks improvement to national safety nets to respond to shocks in a more efficient manner.

Two loan agreements signed in Islamabad

The SHIFT-II supports a federal structure to strengthen basic service delivery for human capital accumulation to help improve health and education services, increase income generation opportunities for the poor, and promote inclusive economic growth.

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 Covid-related closures — and support data-driven decision-making. The programme supports reforms to encourage the women’s participation in the economy by improving working conditions and empowering those in the informal sector. It supports enhancement of national safety nets programmes and better targeting to protect the most vulnerable, building resilience to shocks like the Covid-19 pandemic.

The second $400m loan is related to the Programme for Affordable and Clean Energy — Development Policy Financing (PACE-DPF), which is aimed to reduce circular debt flow through reducing power generation costs, decarbonising the energy mix, improving efficiency in distribution and retargeting electricity subsides.

According to the World Bank, the PACE focuses on measures to improve the financial viability of the power sector and supports 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, World Bank Task Team Leader for the PACE programme. “Decarbonising 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.”

This financial support of $800m under the two programmes will also help in improving the balance of payment and strengthening foreign exchange reserves, the Ministry of Economic Affairs said, adding that the World Bank would immediately disburse $400m followed by another $400m in a couple of weeks. It “indicates the trust of the international financial institution in the government and will augment the government’s efforts to address the direct and indirect impact caused by Covid-19 pandemic.

Published in Dawn, June 30th, 2021