The Debt Trap: IMF, World Bank and Pakistan: Economistan

14th August, a day we celebrate as our independence day is fast approaching amidst ever worsening financial condition and ever growing debt burden. The tradition of taking debt for stimulating growth in our economy was started in early years of Pakistan but these debts have today become a bane rather than a boon for our beloved homeland. As Pakistan entered 21st century, its Public debt exceeded 90% of its GDP, over 600% of its annual revenues, and debt servicing accounted for over half of current revenues. In 2001, Pakistan was the only country in South Asia to be classified as a severely indebted country by the World Bank.

Historically, the Government of Pakistan has faced budget deficit since 1947. Early debts were taken during Ayub regime for building dams and industrialization. It was only during this time that this money acquired from abroad was utilized correctly. However, situation changed after this era and with the loss of East Pakistan and much of our economy after 1971 the events took drastic turn. During the later era’s decisions to acquire debts and to increased budget deficit were influenced by political needs rather than economic priorities. Another huge problem that Pakistan faces even today is the continuation of policies especially positive economic reforms which are often reversed only because they were introduced by a political rival while Pakistan’s government expenditure has been increasing constantly in last four decades.

Such uncontrolled expenditures mainly started during Zia era when foreign aid started to flow in due to Afghan war. The 11 years era of General Zia can be considered worst era of Pakistan’s history not only due to it’s political and socio-cultural disasters it yielded which Pakistanis are still facing today but also due to it’s economic policies. During Zia era the total national debt grew at an average rate of 17.7%. The influx of foreign aid did little to help the debt situation as it soared to 630 billion rupees. In fact One contribution to this was the costly non bank borrowing, e.g. from national saving schemes, and the ratio of debt to GDP kept rising. Interest payments on debt also rocketed to about 28 percent of revenues....

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WB to give $134.68m to Pakistan: The Nation

ISLAMABAD (APP) - The Government of Pakistan here on Friday signed two agreements with the World Bank amounting to US$ 134.68 million for financing projects in different sectors, namely: Third Partnership for Polio Eradication Project (US$ 74.68 million) & Social Safety Nets Technical Assistance Project (US$ 60 million) in Economic Affairs Division (EAD).
The agreements were signed by Farrakh Qayyum, Secretary, EAD on behalf of the Government of Pakistan and Yusupha B. Crookes, Country Director on behalf of the World Bank.
The overall objectives of these projects are to help the Government of Pakistan in enhancing the efficiency and productivity of sectors like Health & Social Welfare. The terms and conditions for the Education Sector Credits will remain as per the World Bank standard i.e. maturity period of the credit is 35 years having a grace period of 10 years.
Government of Pakistan has to pay service charges @ 0.75% and commitment charges @ 0.5% per annum.
The projects details are: The Third Partnership for Polio Eradication Project (US$ 74.68 million) and the objective of the project is to assist the Recipient in its efforts under its Polio Eradication Initiative (PEI) to eradicate polio from its territory.
The project consists of Procurement, supply and use of OPV for the purpose of immunizing children under five (5) years of age under the Supplemental Immunization Activities (SIAs).

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Pakistan, WB sign agreement for poverty reduction: Daily Times

ISLAMABAD: The government of Pakistan and the World Bank signed an agreement at Washington for IDA credit of SDR 321.3 million (US$ 500 million approximately) for Poverty Reduction and Economic Support Operation (PRESO). According to an official statement issued here the credit would support government of Pakistan’s programme to regain and maintain economic stability, bring the economy back on track to a higher growth path while protecting the poor and the vulnerable from adverse shocks. PRESO is a single-tranche Development Policy Credit. The funds will be utilised by the Government of Pakistan for the following key policy areas: Regaining and maintaining macroeconomic stability through increased tax revenue mobilisation, adjustment of fuel prices and power tariffs, improved efficiency of public spending, and strengthened government debt management.

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Pakistan To Get $700 Million More In Loans From WB, ADB - Official: EasyBourse

ISLAMABAD-(Dow Jones)- Pakistan is likely to get a combined $700 million worth of loans from the World Bank and the Asian Development Bank, the country's Finance Advisor, Shaukat Tarin, said Monday.
"Pakistan has received $200 million from the Asian Development Bank, while the country is expected to receive $500 million from the World Bank within a fortnight," Tarin told reporters.
"We are also expected to get another $200 million from the Asian Development Bank during the second quarter of 2009."
The new loans will boost the country's foreign-exchange reserves, Tarin said.
Last week, the country received a $500-million loan from China, a senior government official had said Saturday.

By Haris Zamir and Islamabad Bureau, Dow Jones Newswires

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Pakistan to get $500 million each from China, WB: The Nation

ISLAMABAD (APP) - Advisor to Prime Minister on Finance and Economic Affairs, Shaukat Tarin said on Wednesday that Pakistan would get an amount of US $ 500 million from China by January 5, 2009 while World Bank would extend a similar amount to Pakistan during the next three months. 

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Pakistan to go to WB for water compensation from India: Pakistan Link

ISLAMABAD: Pakistan will go to the World Bank (WB) to seek compensation from India for reduced water flow in the Chenab River and design defects in Baglihar Dam, Indus Water Commissioner Jamaat Ali Shah said on Wednesday. Shah reiterated that Pakistan had demanded water, not monetary compensation, from India for the losses incurred due to decreased water flow in the Chenab. He said both countries had exchanged data about the water flow in the Chenab River during his recent visit to India, but India had objected to the data compiled by Pakistan and asked for a visit to Marala Headworks for inspecting the water flow. The commissioner said Pakistan has authorised India to visit Marala, adding that a demand for compensation for the water losses and an assurance of honouring the Indus Water Treaty in the future has also been put up.

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‘Pakistan to move WB against India over water issue’: Pakistan Link

NEW DELHI/ISLAMABAD: Pakistan will go to the World Bank (WB) to seek compensation from India for obstructing water flow in the Chenab River and design defects in Baglihar Dam, Indus Water Commissioner (IWC) Jamaat Ali Shah said on Saturday. He was talking to Indian reporters at the Indra Gandhi Airport before leaving for Pakistan. He said he had visited the Doda district in Indian-held Kashmir and found several defects in Baglihar Dam. Shah said India had taken 200,000 cusecs of Pakistani water in September ‘in utter violation of the set laws’, hurting Pakistan’s Kharif crops. The two rounds of talks had ended inconclusively, he said, adding India was sticking to its ‘traditional obduracy and inflexibility’. “Talks were held with the Indian officials at length, but I am not satisfied.”

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China to fully finance Diamer Bhasha dam in Pakistan: Daily.pk

In a major development regarding the construction of Diamer Bhasha dam, China has agreed to completely finance the $8.5 billion project, sources in Water and Power Development Authority (WAPDA) told on Thursday. 

German Company Lemhyer has issued final draft of the dam in which the company has projected the cost of dam at $8.5 billion against the earlier projected cost of $6.5 billion in the year 2005. Government wants to start the construction work on Bhasha dam in the year 2009, sources added. 

Pakistan has turned to China regarding the financing of the project after World Bank refused to add the project in the $1.4 billion aid for current financial year 2008-09. They further said that World Bank lending rates are higher and China would provide loan on lower rates. Pakistan had submitted the draft of detailed engineering design of the dam and in response China has agreed to provide financing for the said project. Sources informed that China has also great expertise in the working on big dams and it has expert labour force and machinery for such purposes. 

Chinese government has offered Pakistan to provide skilled labour for the construction of the Bhasha dam as it has 17,000 skilled labourers who have worked on three Gorges Dams in china, which are generating 30,000MW electricity. They said that China has also assured that it would hire a company to provide financing to Pakistan for the construction of the dam. Earlier, Pakistan was looking at Asian Development Bank (ADB) and World Bank.

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