World Bank Group Approves $1 billion for Supporting Economic Reforms in Pakistan

May 2, 2014

New Country Strategy Envisages up to $11 billion Assistance over 5 years

Islamabad, May 02, 2014 - The World Bank Group approved a package of assistance worth US$1 billion to support Pakistan’s economic reforms on Thursday. The assistance package consists of two Development Policy Credits (DPCs) to support the Government of Pakistan’s efforts to improve the power sector, and reinvigorate growth and investment for reducing poverty and building shared prosperity. 

“The Government of Pakistan deserves appreciation for stabilizing the economy, initiating reforms in the power sector as well as revenue mobilization and drawing in the private sector for spurring growth”, said Philippe H. Le Houérou, Vice President of World Bank Group’s South Asia Region. “Staying on the structural reform path is important for competitiveness of the economy, which in turn is essential for creating jobs and lifting millions out of poverty in Pakistan.”

The Power Sector Reform DPC of US$600 million (with additional co-financing support of the Asian Development Bank and Japan) supports Pakistan’s goal of developing an efficient and consumer-oriented electric power system that meets the needs of its people and economy, sustainably and affordably. The Power DPC focuses particularly on policy and institutional actions that will improve financial viability and thus reduce the burden of public financing for the sector. The Power DPC is structured around three objectives: targeting power subsidies to the poorest and improving tariff policy; improving sector performance and opening the market to private participation; and ensuring accountability and transparency.

The Fiscally Sustainable and Inclusive Growth DPC of US$400 million, supports Pakistan’s goal of accelerating growth to help create jobs and economic opportunity for all. The main development objectives of the credit are to increase private and financial sector development, improve the business environment, facilitate trade and promote financial inclusion, enhance revenue to create fiscal space for expanding social protection for the poor.

The two credits are financed from the International Development Association (IDA), and will be on standard IDA terms, with a maturity of 25 years, including a grace period of 5 years.

The World Bank Group’s Board of Executive Directors also discussed the Group’s – including International Finance Corporation and Multilateral Investment Guarantee Agency – new Country Partnership Strategy (CPS) for Pakistan envisaging a notional financing envelop of $11 billion over the next five years (Fiscal Years 2015-19) for development in both public and private sectors. 

"Pakistan is a key country for the International Finance Corporation”, said Dimitris Tsitsiragos, IFC Vice President for Europe, Central Asia, Middle East and North Africa. “We have a portfolio of close to $1 billion which represents one of the largest in the region. Our focus has been to support Pakistan’s private sector and increase investments to catalyze other players in the market, especially in the energy sector. This joint strategy marks another important milestone in our partnership with the country together with the World Bank and MIGA. Over the next few years we will continue to enhance our support to improve the investment climate and leverage more private investments, including in energy as well as expand access to finance for the underserved groups.”

The WBG’s Pakistan Country Partnership Strategy is anchored in the Government’s framework of 4Es: Energy, Economy, Extremism and Education; and the initial priorities of the incoming Vision 2025.  Enough flexibility has also been built into the Strategy to allow for quick reallocation of resources in case of unforeseen needs or emergencies.

“Helping Pakistan in deepening multi-sectoral policy reforms and performance based investments in the social and human development sectors has guided the Bank Group’s assistance strategy in Pakistan over the last few years”, said Rachid Benmessaoud, World Bank Country Director for Pakistan. “In formulating the new Country Partnership Strategy, a wide range of stakeholders including civil society, media, youth, parliamentarians, and federal and provincial governments were consulted. The new strategy is structured to help the country tackle the most difficult, but potentially transformational areas to reach the twin goals of poverty reduction and shared prosperity.”

The four strategic pillars or result areas of the new Country Partnership Strategy are:

  • Transforming the energy sector. Policy reforms and large investments in the power sector aim to reduce load shedding, expand low-cost generation and supply, improve governance and cut losses;
  • Supporting private sector development. WBG’s support is aimed at strengthening the business environment, improving competitiveness and productivity of farms and businesses, and making cities growth friendly to support productive and quality jobs;
  • Reaching out to the underserved, neglected, and poor. The strategy has a special focus on targeted support for poorer districts and vulnerable groups e.g. women and youth; micro, small and medium enterprises particularly in fragile and crises-affected provinces / regions; and support for enhancing resilience and adaptation to the impact of climate change;
  • Accelerating improvements in public service delivery. WBG would support efforts for increasing revenues both at the federal and provincial levels to fund public services and setting more ambitious targets to create greater impact in critical areas especially education and health; and  
  • Leveraging regional markets. As part of the four result areas, this cross-cutting program focuses on energy and trade, aimed at an integrated electricity market in South Asia with power transmission links to Central Asia and India; and other opportunities to capture the potential of cross-border trade between Pakistan and its neighboring countries. Sustained economic cooperation can help contribute to growth as well as overall stability in the region.

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