ISLAMABAD:
The World Bank is set to approve a $20 billion indicative lending package for Pakistan – a globally first mega 10-year envelope that will protect its funded projects from political transitions and focus only on six targeted areas.
The areas have the broader political spectrum support and are expected to be unimpacted by any changes in the government during 2025 to 2035 periodthe timeframe in which at least three general elections are expected to be held.
Titled “Pakistan Country Partnership Framework 2025-35”, the programme largely aims at improving social indicators in the most neglected but important areas such as health, education and climate change, according to official documents and background discussions with the Pakistani authorities, who negotiated the package.
A key Pakistani official, who was part of the framework development, said that the World Bank had picked Pakistan as the first country, where it would introduce a 10-year partnership strategy.
“The World Bank’s total indicative lending envelope for fiscal year 2025 to 2035 will total around $20 billion”, reads the draft of the framework. This ‘Country Partnership Framework’ is scheduled to be approved by the World Bank board on January 14th.
After the approval, the World Bank’s Vice President for South Asian Martin Raiser is also expected to visit Islamabad.
The 10-year framework is anchored in six target outcomes, focused on critical foundations of development where Pakistan lagged the most. After 10 years, the plan will reduce child stunting by 30% and the learning poverty to below 60%.
Out of the $20 billion, the World Bank’s concessional arm, the International Development Association (IDA), will lend $14 billion and the remaining $6 billion is projected to be provided through the relatively expensive window – the International Bank for Reconstruction and Development (IBRD).
“However, these indicative loans will depend upon the evolution of the IDA funding over the years, Pakistan’s standing and performance, including with respect to the Sustainable Development Finance Policy and its debt vulnerability indicators,” reads the documents.
In addition to the $20 billion loans to the government of Pakistan, the new Country Partnership Framework also aims at supporting another $20 billion private lending by the World Bank’s two other arms – the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). This brings the total package to $40 billion but the official loans will be equal to $20 billion.
The World Bank’s new lending to Pakistan will focus on six areas, which “currently enjoy strong support across the Pakistani political spectrum”, according to the documents.
The World Bank’s concessional and expensive lending will be meant for “larger projects on average, more frequent scale-ups and expansions, and less pilots and one-off operations”, according to the planning document of the World Bank.
The World Bank new framework will focus on six areas but it will phase out lending from 10 less-impactful sectors.
The areas such as transport, power transmission, telecoms, mining and urban infrastructure would not get IDA or IBRD funding. The World Bank will support these sectors through investments facilitated by the IFC and MIGA guarantees for foreign investments.
The World Bank will also exit from tertiary healthcare, higher education, vocational and technical training, logistics and entrepreneurship.
The World Bank’s new strategy marks a shift from “short-term macro-fiscal adjustment programmes and often small investments scattered in a wide array of sectors, to more selective, stable and larger investments in areas that are critical for sustained development and growth.
The documents stated that the World Bank would still be supporting reforms to spur growth and investment, as well as to build more fiscal space.
The 10-year planning framework “will help shield the programme from the country’s volatile polity and from frequent swings in priorities and requests that follow government changes”.
The requests being made, subsequent to changes in the government, have led to “fragmentation of the World Bank portfolio and diluted impacts”, according to the World Bank’s assessment.
The World Bank documents stated that Pakistan’s income levels had stagnated and there was a high rate of child mortality, child stunting, fertility and learning poverty due to low investment in health, education, water, sanitation and other public services.
The World Bank said that the reasons for low investment and growth include inconsistent macroeconomic policies fuelled by a volatile polity, a complex and inconsistent business environment, distortive trade and investment policies and recurrent conflicts of Pakistan’s borders.
“The most recent cycle was exacerbated by heightened political instability that magnified the adverse impacts of Covid-19, commodity price shocks and 2022 floods”.
Pakistan’s economy is slowly recovering from the recent macroeconomic crisis as the government is engaging in a new round of ambitious fiscal, energy, business environment and other reforms, according to the assessment by the Washington-based lender.
Six areas
The first target area will be reducing child stunting by focusing on health and nutrition and family planning agenda, particularly for adolescent girls, mothers and newborns.
As a result of the World Bank’s lending, it is expected that 54 million people will receive quality health, nutrition and population services, 18 million women will be using modern contraceptives and 60 million people will be provided water, sanitation and hygiene services.
The second target area is reducing learning poverty via improvement in enrolments and ensuring attendance in quality primary and secondary schools that provide strong foundational learning, especially for girls, who constitute a majority out of school children.
Due to the World Bank’s lending, about 12 million children – nearly half of the currently out-of-school kids – will be targeted for better education, according to the plan.
The third area is increasing climate resilience and addressing the water agriculture climate nexus. About 17 million people will have nutrition security and 78 million people will be provided enhanced resilience against climate risks.
Decarbonising of the environment is the fourth area. And the World Bank’s intervention will be through sustainable transition to lower greenhouse gas intensity, particularly in energy, as well as addressing the emission drivers of air pollution.
The planned interventions will help in 25% reduction in annual average air concentration of particular matters and 10 GW of renewable electricity will be produced.
The fifth sector will be increasing fiscal space by enhancing revenue collection and rationalising expenditure. The goal is to stabilise the fiscal framework and eventually increase progressive and efficient public spending on basic social services for the bottom half of the population. The interventions are projected to increase the tax-to-GDP ratio to 15%.
The other goal is to increase public spending towards the bottom half of the total population by 60% during the implementation period.
Increasing private investment to improve productivity is the sixth sector and this area will target the private investment. About $20 billion private capital investment will be facilitated, according to the World Bank’s estimates.
The implementation of the 10-year framework will be supported by two-year rolling business plans that both sides will agree upon.
