PESHAWAR, April 11: The NWFP is set to get $400 million soft-term loan from the World Bank under Programmatic Structural Adjustment Credit (PSAC) facility, official sources told Dawn here on Wednesday.

“The province will shortly enter into a $400 million loan agreement with the World Bank in the near future,” said a senior officer of the provincial government.

A formal agreement between the two sides will be signed shortly after the bank’s board of directors inks approval to the loan deed based on the NWFP’s three-year rollover medium-term reform programme unfolded by the provincial government.

According to sources, the zero-interest rate loan involving about two per cent service charges for the NWFP would be on the patron of the WB’s credit facility extended, under the same programme, to the Indian states of Maharashtra and Karnatka.

The credit, sources said, would be a single tranche operation to form part of a series of three credits.

During the first two years of operations, the province would receive $150 million per annum ($300 million in two years). Whereas, in the third and last year $100 million would be disbursed on the basis of the government’s performance in terms of achieving the benchmarks focusing on the core elements of the provincial reform programme, including fiscal restructuring and financial management reforms, administrative restructuring and civil service reform and reforms to improve service delivery in key sectors, including education and health.

The details of the credit facility were recently finalized by the Pakistan-based World Bank authorities and the provincial government’s quarters’ concerned and the same was forwarded to the Bank’s head office in Washington for the approval by the board of directors.

“The credit,” sources said, “would be utilized, on the part of the provincial government, to restructure large provincial debt amounting to over Rs60 billion, reduce its annual debt service burden eating up over 20 per cent of the revenue receipts of the province every year and facilitate a sustainable fiscal position.”

According to sources, the proceeds of the credit would be in the form of BOP and budget support for the federal government whose rupee proceeds would be fully passed on to the NWFP in the form of budgetary support.

The first tranche is expected to be released to the province at the start of the next financial year.