World Bank Sets Tough Conditions For Pakistan For $1.5 Billion Loan

The Reports say that the government’s reliance on foreign loans and it has recently borrowed $2.5 billion by floating Eurobonds.

ISLAMABAD: (UrduPoint/UrduPoint / Pakistan Point News-April 17^th, 2021) World Bank has put tough conditions for $ 1.5 billion lending such as increase in electricity rates and introduction of new power and tax policies, the latest reports say.

The Reports say that for $500 million RISE loan, World Bank has set condition that provincial governments issue a notification adopting the Federal Board of Revenue (FBR) valuation tables applicable to Urban Immovable Property Taxes to keep the assessment ratios at 85% of market value.

Signing of performance contracts with the board and management of all power sector companies is also part of the RISE loan condition.

Federal and provincial finance departments are also required to issue implementation of regulations following the approval ofcommon GST laws passed by the federal and provincial assemblies to generate a harmonised GST for goods and services across the country.

Another condition was that Finance Division would convert all bearer prize bonds into registered instruments through biometric identity verification; and the SECP would issue a notification on establishment of secured transactions collateral registry to enhance SME access to finance. The provincial cabinets, for securing $500 million SHIFT loan, are required to approve a mechanism for a nationwide harmonisation of birth and death registration with the national civil registry at NADRA.

Ministry of Finance and provincial Finance Departments will also have to approve the inclusion of all remaining capital costs under the respective expanded program on immunisation into the recurrent budget.

Some of the IMF programme conditions like elimination of nonstandard preferential rates and tax exemptions, and bringing those goods to the standard rate of 17% are also part of the World Bank conditions for $1.5 billion lending.

The development has taken place when the finance ministry was seeking three budget support loans totalling $1.5 billion from the World Bank before the end of June.

The loans are part of the overall $27 billion external financing requirement for the current fiscal year, said the finance ministry sources. The government reliance on foreign loans is deepening and it recently borrowed $2.5 billion by floating Eurobonds.

The State Bank of Pakistan’s $16 billion foreign Currency reserves are the result of foreign loans, including $11 billion worth of lending by China in the shape of safe deposit and currency swap agreement. The only silver lining is the remittances from overseas Pakistani workers that are growing at a pace of 25%.

Some of the conditions that the World Bank has set are also part of the IMF programme, which the Fund revived three weeks ago, but the government now wants to renegotiate it.

Newly appointed Finance Minister Shaukat Tarin has already publicly stated that he would like to renegotiate the IMF deal. Sources said that the World Bank wanted to finalise the $500 million PACE programme ahead of the second series of RISE and SHIFT.