The World Bank and Pakistani authorities have discussed cancellation of different loans amounting to millions of rupees of federal and provincial governments. This was revealed in a letter written by World Bank Country Director Najy Benhassine to Minister for Economic Affairs Omar Ayub Khan.

The Bank’s Mission recently met with different officials and discussed different issues related to various projects being funded by it. The Bank discussed FY2022 disbursement progress, potential cancellations in federal portfolio, as well as, remaining pipeline operations to be approved in FY2022 and new approach to monitoring Pakistan’s portfolio using satellite and other technology and looked forward to hearing about the systems Pakistan is putting in place in more detail as there may be synergies that can be exploited with the World Bank Geo-enabled Monitoring Systems for remote monitoring.

Concerning the investment project financing, World Bank discussed that many of the remaining large disbursements will come from the energy portfolio. Both sides discussed the following projects in detail:

National Transmission Modernization-I project: The delays related to the Islamabad West substation have the potential to impact the evacuation of power from other energy investments. Additionally, other project management issues related to delays in processing PCIs are hindering progress. The Bank welcomed close attention to this project and appreciated the immediate follow-up with Islamabad authorities and NTDC.

Tarbela fourth extension hydropower project: World Bank encouraged hearing that the request for an extension to the project has been received by Economic Affairs Division (EAD) from the Water and Power Development Authority (WAPDA). Regarding the cancellation that was discussed during the last implementation support mission in September 2021, EAD team will confirm the final amount to be cancelled, and the intended use of any finances that are not cancelled, after hearing from WAPDA.

Dasu Hydropower Stage-1 Project: As discussed, the project faces significant challenges related to the right of way in Pattan for the transmission line. World Bank wants follow up and looks forward to hearing the outcomes from the exchanges with the Chief Minister of Khyber Pakhtunkhwa (KP). Regarding the financing gap anticipated in 2023, this will be incorporated into bilateral discussions on the FY23 pipeline which will be taking place within the next few weeks. The project is also subject to delays related to Sinosure insurance cover.

As confirmed in the meeting, World Bank is following up on a potential additional allocation for vaccines of up to $150 million from IDA. This would be in addition to the country’s current IDA allocation for FY2022. The additional financing process would take approximately 3 months; therefore, World Bank encourages the Government to take this timeframe into consideration in its vaccination financing projections.

The Bank also discussed the results-based Federal portfolio and the need to achieve the planned FY2022 results with sufficient time to allow verification and withdrawal applications. The results-based operations that were the focus of discussion included the following:

Actions to Strengthen Performance for Inclusive and Responsive Education: Until now Punjab Pakistan Raises Revenue. While having made progress against the disbursement-linked indicators (DLI), there is a delay in the Technical Assistance component of the project. As mentioned, World Bank team will be meeting monthly with the FBR Chairman to ensure progress continues, including on the procurement of IT equipment.

World Bank appreciated Minister for Economic Affairs for offering to write to the Chief Minister of each provinces and the Principal Secretary of the Prime Minister, to address the outstanding DLIs that require engagement with provinces.

The World Bank will be taking forward the government’s suggestion to do an analysis of the impact of the financing that has been channelled to government systems’ strengthening through the PFM and PRR operations.

This analysis will provide a basis for communicating the outcomes of these reforms and will also demonstrate the impact of this financing in terms of savings, increases in revenue and diversity of revenue sources. This analysis would also include key reforms such as the PFM Law, e-Procurement, taxes and revenue.

The Bank will be sharing a suggested approach to this analysis with EAD by February 18. 2022. As discussed at a meeting in November 2021, there are a number of opportunities in the Federal portfolio to adjust the size of projects through cancellations.

In the case of cancellation of DA credits, these resources can be reinvested towards operations that are likely to achieve results more efficiently. As per the tables of cancellations that were reviewed in the meeting, to date, World Bank has received requests for cancellation from the provincial authorities this fiscal year of $91.5 million. Cancellations from the Federal portfolio received this fiscal year amount to $20 million.

The potential Federal cancellations will be discussed with the counterpart Ministries to come to decisions on the cancellations between now and March 4, 2022.

This report was first published in Business Recorder on February 17, 2022.