World Bank links $450 million loan disbursement with IMF loan’s resumption
ISLAMABAD: The World Bank has linked approval of second RISE-II (Resilient Institution for Sustainable Economy) loan involving $450 million with the completion of the stalled International Monetary Fund (IMF) programme.
This strategy of the World Bank might create foreign exchange problems and delay the WB-funded development programmes.
The Asian Infrastructure Investment Bank (AIIB) would also provide co-financing of $250 million, so in totality, Pakistan is eyeing to secure $700 million in programme loans during the current financial year, The News reported today.
However, the approval of the second RISE programme has been linked with macroeconomic stability and the completion of the pending IMF review.
The revival of the IMF programme has so far proved a hard nut to crack, as both sides are engaged in talks since February but the staff-level agreement could not be realised.
Almost three months have passed but the staff-level agreement is yet to be reached mainly because the gross external financing gap could not be fulfilled up to the satisfaction of the Fund.
When Pakistan and the IMF concluded in-person talks on February 9, the IMF estimated that Pakistan required gross external financing of $7 billion for the ongoing financial year.
Keeping in view the improvement in the current account deficit which ultimately turned into a surplus of $654 million for the last month, the IMF slashed the requirement of external financing needs to $6 billion and finally to the level of $5 billion.
Out of $5 billion in external financing needs, Pakistan secured confirmation on the financing of $2 billion from Saudi Arabia and $1 billion from the United Arab Emirates. However, formal agreements have not been done so far.
The Pakistani authorities, however, claimed that a formal agreement with Saudi Arabia has been exchanged and it would be done.
Now the remaining $2 billion in external financing remain unfulfilled. The Pakistani authorities argued that the World Bank and AIIB were expected to disburse $700 million in programme loans within the period of the ongoing financial year.
Out of the remaining $1.3 billion, Pakistan expects $300 million in project financing from the international donors for flood-affected areas till end June 2023.
Now the remaining $1 billion in financing is required from the international commercial banks. It is not yet known how this $1 billion financing from the commercial banks would be secured as the banks were asking for signing an agreement with the IMF but the Fund has been asking for confirmations.
The Pakistan side did not rule out the possibility of involvement of a “political angle” behind these dillydallying tactics on the part of the IMF. Pakistan has been sandwiched between the US and China and the authorities do not have a crystal clear clue about how to proceed further to steer the country out of the severe crisis.
In response to a question sent to the World Bank’s spokesperson, the officials said: “The World Bank continues to work with the Government of Pakistan on the preparation of the RISE-II Development Policy Operation, including discussions around supported policy actions on which there has been considerable progress recently; the adequacy of the macroeconomic framework; the financing amount; and the timeline for approval, in particular, as it relates to the completion of the ongoing IMF review”. Courtesy The News
