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World Bank renews pledge for $1.4bn loan

October 13, 2008

WASHINGTON, Oct 12: The World Bank, which is providing $1.4 billion loan for investment projects and budgetary support to Pakistan, has also identified lack of policy action over the past two years and high international commodity prices for the economic crisis the country faces.

The loan — offered during a meeting between President

Asif Ali Zardari and World

Bank president Robert Zoellick in New York last month — includes $600 million for investment portfolio and $800 million for budgetary support.

The bank reiterated its offer on Saturday when Prime Minister’s Adviser on Finance Shaukat Tareen met the bank’s managing director Ngozi Okonjo-Iweala.

In its country assistance strategy for Pakistan for 2006-09, the bank had already pledged $1 billion for fiscal 2009 while $544.9 million was set aside for fiscal 2008, which expires in June 2009.

It is not clear if the money promised to President Zardari is a separate pledge or comes from the Pakistan Country Assistance Strategy fund.

The bank’s country assistance strategy for 2006-09 envisaged a flexible lending programme of up to $6.5 billion — a substantial increase over the previous CAS period.

This included between $200 million and $850 million annually from the International Bank for Reconstruction and Development (IBRD), one of five institutions that comprise the World Bank Group.

The current portfolio consists of 22 projects, with total commitments of $2.3 billion.

In a related report, the bank noted that “Pakistan faces an economic crisis due to high international commodity prices and a lack of policy action during the past two years.”

The bank also noted that the government of Pakistan was now starting to implement reforms on petroleum and power prices, tightening monetary policy and controlling expenditures. “But more needs to be done,” it added.

The report noted that Pakistan’s development emphasis remained on social protection, poverty reduction and infrastructure, particularly in water management, transport, and energy. Over the last few years, Pakistan’s human development indicators largely lagged behind other countries in the region, the report added.

“Key challenges facing Pakistan include a poorly targeted social safety net, an infrastructure deficit – particularly in energy, transport and irrigation, and poor delivery of social services.”

The World Bank pledged to deepen its engagement on social protection, community-led development, water management, energy and infrastructure, while maintaining strong programmes in education and irrigation.

Meanwhile, Britain’s Department for International Development has doubled its economic assistance for Pakistan to £586 million.

Mr Tareen also had productive meetings with German Minister for Economic Cooperation and Development Wieczorek-Zeul, US Under-secretary of State for Economic, Energy and Agricultural Affairs Reuben Jeffrey and Assistant Secretary of State for Economic, Energy and Business Affairs Daniel Sullivan.

The German minister vowed to provide support for social safety nets and also offered debt swap for HIV-Aids and Malaria Global Fund.

US officials reaffirmed Washington’s continued support for Pakistan’s economic development.

Mr Tareen also discussed bilateral cooperation with Afghan Finance Minister Anwar ul Haq Ahady.

He briefed his interlocutors on current economic challenges confronting Pakistan and on the impact of the war on terrorism which is also affecting the country’s economy.

Mr Tareen sought donors’ support for Pakistan’s efforts to pull itself out of the current economic crisis. He also highlighted the impact of global financial crisis on developing countries, particularly on those intending to access capital market but cannot do so because of liquidity crunch.

The Pakistani delegation includes State Bank Governor Dr Shamshad Akhtar, Finance Secretary Dr Waqar Masood, Secretary Economic Affairs Division Farrukh Qayyum and Economic Minister at the Pakistani Embassy in Washington Wajid Rana.