Pakistan has recently signed an agreement with the World Bank for IDA credit of SDR 321.3 million (500 million dollars) for poverty reduction and economic support operation (Presco). The agreement was targeted to retain economic stability, bring the economy back to as higher growth path while protecting the poor and vulnerable from adverse shocks.
The Presco is one of the three budgetary support credits that the World Bank will provide to Pakistan during the current fiscal. The IDA credit for the Presco will be repayable in 35 years with 10 years' grace period. The credit will be interest-free, but only the service charges at a rate of 0.75 percent per annum on the withdrawn credit balance, and the commitment charges at a maximum rate of 0.50 percent per annum on the un-withdrawn balance, will be paid.
The Presco is a single-tranche development policy credit. The funds received under the Presco will be utilised for retaining and maintaining macroeconomic stability through increased tax revenue mobilisation, adjustment of fuel prices and power tariffs, improved efficiency of public spending, strengthening of government debt management, enhancing competitiveness through reduced barriers to business entry and exit, protecting the poor and vulnerable through improved targeting of safety nets and cash transfer programmes and strengthening of statistical system.
The reform programme, supported by this operation, is based on the government's recently adopted second poverty reduction strategy paper. Pakistan has experienced severe external and internal shocks in the past year and is confronting a very difficult macroeconomic situation. The rise in international oil and food prices sharply inflated the country's import bill and the subsequent slowdown in the global economy dampened external demand for Pakistan's exports.
On the internal side, political turmoil and uncertainties affected investors' confidence which, together with macroeconomic imbalances, led to capital outflows. The World Bank has already said: "With dampened external demand for its exports, an inflated import bill and low investor confidence, Pakistan needs additional assistance from the international community to restore economic stability and bring its economy back to a higher growth path."-PR

Copyright Business Recorder, 2009