WORLD BANK'S ROLE IN ECONOMIC BUILDING
SHABBIR H. KAZMI
Mar 14 - 20, 2011
During the past five years up to March 2010, the World Bank has approved 31 operations of total US$3.9 billion for Pakistan. It has also prepared the new Country Partnership Strategy (CPS) for the period 2010-13. It is built on knowledge, diagnostics, and analytical work undertaken over the years by the bank and other development partners in Pakistan. This also takes into account the results and lessons learnt from the bank's past programs in the country and will also reflect the government of Pakistan's development priorities. The proposed activities of the CPS are clustered around three pillars: 1) sustained macroeconomic stability and reduced macroeconomic vulnerability; 2) improved human development and social protection; and 3) improved environment for private sector investment and growth.
Governance is a cross cutting theme across all of the pillars. In 2007/08, the sharp rise in international oil and food (specifically wheat) prices, combined with internal political turmoil, led to rapidly expanding macroeconomic imbalances in Pakistan. To avoid a balance of payment crisis and default on foreign debt payments, the government developed a home-grown stabilization program, which was supported by the IMF through a Stand-By Arrangement (SBA) signed in November 2008. The program includes a medium-term macroeconomic framework, which envisages fiscal and monetary tightening to bring down inflation and reduce the external current account deficit to sustainable levels. The development emphasis remains on poverty reduction and social protection, particularly on enhancing social safety nets for the most vulnerable sections of society. Infrastructure is also vital, particularly in water management, transport, education, and energy.
Continuing challenges facing Pakistan include the combined effects of food and fuel crisis, the global financial crisis and continuing volatile security situation, insufficiently targeted social safety net, an infrastructure deficit ñ particularly in energy, transport, and irrigation, and poor delivery of social services. While Pakistan's human development indicators have generally improved over the past few years, the country lags behind most other countries in the region.
In April 2010, the World Bank approved to provide $145.6 million for the rehabilitation and modernization of Jinnah barrage, Pakistan's first major diversion structure on the mighty Indus River. The project is located near Kalabagh in Mianwali district, about 126km downstream from Tarbela Dam. The barrage is one of the most important structures in Pakistan's irrigation system handling all the Indus river water. It provides water to the Thal Canal that covers an area of 2.1 million acres in arid and desert zone where crop production is only feasible with irrigation.
About five million people in five districts inhabit the command area and their livelihoods depend directly or indirectly on the irrigation supplies of the canal. The barrage faced hydraulic structural problems, including retrogression on the downstream side undermining the structure, improper approach to the river on the upstream side resulting in parallel flow to the barrage, and many of the barrage's gates were not operating properly.
With these safety issues, the barrage is now in a dilapidated condition and threatened by further damage from retrogression of the river and requires urgent rehabilitation and modernization, says an evaluation report of the bank. It was anticipated that the project would have positive environmental impact on the long run through supply of water to more than 2.1 million acres of barren land by maintaining adequate pool level behind the barrage allowing fish and aquatic life, the report stated.
The barrage was commissioned in 1946 with the objective of providing about 7,500 cusecs of water to Thal Canal to irrigate a cultivable command area of 2.1 million acres of five districts, Bhakkar, Layyah, Khushab, Mianwali and Muzafargarh.
The bank's strategy is designed around three main pillars:
SUSTAINED GROWTH AND IMPROVED COMPETITIVENESS
The principal focus of this pillar is to support investments and reforms needed to sustain rapid, private sector-led growth. The bank provides support to key sectors such as agriculture and infrastructure, and helps the government strengthen macroeconomic management through improving public expenditures and supporting ongoing tax reforms.
STRENGTHENED GOVERNANCE AND SERVICE DELIVERY
Priorities in this area are aimed at supporting further reforms and investment to increase efficiency, transparency, and accountability in the use of public resources.
IMPROVED LIVES AND PROTECTION OF THE VULNERABLE
The bank focuses on increased investment to education and health sectors, which are necessary to build the skilled and healthy workforce necessary to sustain recent growth performance. This area of the CAS also features targeted interventions to help the poor, including strengthening safety nets and targeted interventions and community-based approaches in rural areas.
The World Bank Group's assistance program is aligned with the respective responsibilities of federal and provincial governments and tailored to meet the needs of the individual provinces. Around half of the lending is channeled to the provinces which bear most the responsibility for delivering public services such as irrigation, education, health, and water supply and sanitation.
The NWFP First Development Policy Credit (US$90 million) supports the implementation of the provincial government's medium-term reform program and is based on four pillars: reforms to accelerate human development and improve basic social service delivery; promoting growth and private sector development; fiscal reforms; and governance reforms in public financial management, procurement, civil service, and administrative devolution.
The Punjab Education Development Policy Credit (US$100 million) supports efforts of the provincial government to implement wide-ranging reforms in the education sector. The credit is the last in a series of three development policy credits supporting the government of Punjab's three-year Education Sector Reform Program (PESRP), designed to enhance access, improve quality of education, and improve gender parity. Since the launch of the reform program, more than one million more children have been enrolled in Punjab schools.
The Punjab-Irrigation Sector Development Policy Loan (US$100 million) will provide financing to a major provincial reform agenda to improve fiscal management and service delivery. The project is designed around four main pillars: institutional and policy reforms to improve the management and maintenance of Punjab's irrigation system to ensure its integrity and sustainability; water resource management reforms to make intra-province water allocation and distribution more transparent; irrigation service delivery reforms to improve the quality, efficiency, and accountability; and reforms to encourage introduction of new technologies to improve water use efficiency and on-farm productivity.
The Punjab Municipal Services Improvement Project (US$50 million) is designed to improve the viability and effectiveness of urban services provided by the participating Tehsil Municipal Authorities (TMAs), and to make these improvements sustainable and replicable in other municipalities. Since TMAs are not legally able to borrow money, project funds will be passed on to TMAs as grants. These grants will finance activities in two areas: strengthening the capacities of the TMAs for improved urban management, governance, and service provision; and financing infrastructure investments.
Given the serious and multifaceted challenges that Pakistan faces, this CPS poses greater than normal risks. The 2010-13 strategy will be implemented in the context of economic austerity with the potential for policy reversal as well as other uncertainties. Notably, although Pakistan has made much progress in stabilizing the economy, reviving growth of GDP, exports and foreign exchange reserves and reducing inflation and the current account deficit, the fiscal situation remains vulnerable and inflation high and hence there is a risk of macroeconomic slippage. In addition, ongoing conflict within Pakistan and in Afghanistan poses a risk to stability while proposed Bank Group activities in the conflict-affected northwest greatly increase the bank's exposure to such risks.
Finally, there are implementation risks which impact the bank group's program. The bank group will seek to mitigate these risks through proactive measures to reduce exposure of staff to security risks and through alternative means of supervision along with continued attention to capacity building and robust fiduciary arrangements such as those involving third-party monitoring. By design, the bank program is largely structured to be dependent on results, with disbursements for a significant part of priority program and commitments against the contingent part of the overall program firmly dependent on program and results achieved during implementation.