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Country Partnership Strategy Progress Report

December 22, 2011

This Progress Report is a mid-term implementation assessment of the Country Partnership Strategy (CPS) for Pakistan. The Pakistan CPS was discussed by the World Bank's Board of Executive Directors on July 8, 2010 and covers the period FY10-FY13. Recognizing the challenges facing Pakistan, the CPS was kept flexible by design. The economic, political and security challenges Pakistan has gone through over the past two years have validated this approach. This Report assesses changes in the program during the past two years and proposes adjustments for the remaining period.

Country Context and Emerging Issues

The present government, elected in 2008, has had to face many challenges. These include continuing pressures of coalition politics, militancy crises and consequent violence in many parts of Pakistan, recurring natural disasters like the 2010 and 2011 floods, provincial decentralization, and a difficult economic situation. The Senate elections in 2012 and General elections in 2013 and the resulting political transition may influence the pace of reforms.

Progress Towards CPS Outcomes

The CPS sets out a strategy for Pakistan around four pillars: (i) improving economic governance; (ii) improving human development and social protection; (iii) improving infrastructure to support growth; and (iv) improving security and reducing the risk of conflict. Pakistan's overall performance has been mixed, with considerable achievements in education and social protection but with little or no progress on increasing revenue mobilization, expanding power provision and improving system efficiency.

Going Forward: Proposed Program For FY2012-FY2014

The overall focus of the Bank's strategy - to help Pakistan's economy get back onto a path of high, sustained growth - remains valid. The partnership remains centered on the existing strategic pillars of the CPS and evolving federal and provincial priorities as validated by the government and other stakeholders during various consultation sessions. In consultation with the Government, the CPS period would be extended to include FY14. This will better synchronize the CPS with the national political cycle and the IDA cycle.

Key Risks and Mitigations

The operating environment in Pakistan has become even more daunting since the time the CPS was formulated, and so there are high risks across many aspects of WBG operations in Pakistan. These include political uncertainty, lackluster economic performance, natural disasters and security issues. Pakistan's development needs are pressing, and the Bank's continued investments can help generate substantial benefits; yet even with risk mitigating measures, expectations in such an environment must be calibrated realistically.