WB approves $350m package for Pakistan

ISLAMABAD, Dec 21 (Express Tribune): The World Bank (WB) greenlit a $350 million package for Pakistan's budget financing, highlighting the need for fiscal and structural reforms. This move comes amid concerns raised by the World Bank's board members over Pakistan's low tax collection relative to the size of its economy.
The World Bank's Board of Executive Directors unanimously approved the $350 million financing for the Second Resilient Institutions for Sustainable Economy (RISE-II) operation, according to a press statement issued on Wednesday. The approval for the $350 million comes after a two-year delay, attributed to weak economic fundamentals, the absence of an International Monetary Fund (IMF) umbrella, and uncertainty over upcoming elections. The Washington based lender moved forward with the case for board approval only after obtaining clarity on these aspects.
World Bank Country Director for Pakistan, Najy Benhassine, stressed the urgency of fiscal and structural reforms to restore macroeconomic balance and establish the foundations for sustainable growth. He noted that RISE-II completes a first phase of tax, energy, and business climate reforms aimed at generating additional revenues, improving expenditure targeting, and stimulating competition and investment.
Although Pakistan met all nine prior conditions for securing the budget financing loan, the lender moved forward only after the completion of the first review of the $3 billion IMF programme and the announcement of the February 8th election date.
The board members raised concerns about Pakistan's approximately 10 per cent tax-to-GDP ratio, which they deemed insufficient to meet growing expenditure needs and contributing to higher public debt.