World Bank has generally been quite liberal in extending project loans to Pakistan. On 16th March, 2017, it again announced the approval of another loan of dollar 450 million for expanding banking access and social protection programme. Of the dollar 450 million, dollar 300 million will be provided to support Pakistan's efforts towards promoting a more inclusive and transparent financial sector. The programme is aimed at providing financial access throughout Pakistan for 50 percent adults by 2020 from the existing level of 16 percent. One of the ambitious targets under the dollar 300 million loan is expanding the access to credit to 25 percent among women and doubling the credit facility for SMEs to 15 percent in three years. The World Bank will also support the government's policies on enhancing financial inclusion through launching a national digital transaction accounts scheme and modernising the Central Directorate of National Savings (CDNS). Another programme for dollar 100 million was approved for the National Social Protection Programme (NSPP) aimed at assisting the government in strengthening the national social safety net system for the poor. The loan will support the BISP in updating the National Socio Economic Registry and other social programmes, and incentivise improvements in the service delivery systems. Another dollar 50 million programme was approved for the Punjab Tourism for growth projects. The loan will strengthen institutions in Punjab, increase private sector participation and improve infrastructure to support the tourism sector.

All the three loans announced for Pakistan amounting to dollar 450 million seem to have been provided for the right kind of purposes. The financial access and inclusion in Pakistan remains low and needs to be enhanced substantially to mobilise a higher level of savings and incentivise a larger number of people to undertake entrepreneurial activity as a way of life to utilise the productive potential of the country. At present, about 100 million adults in Pakistan don't have access to formal and regulated financial services and various measures are contemplated through the Finance for Growth Development Policy (FGDP) to enable the financial sector to play an enhanced role in the economy. However, the targets of FGDP programme appear to be somewhat overambitious as enhancing the access of financial services by more than three times in a period of 3-4 years would be extremely difficult. The priority for expanding the outreach of financial services to the SMEs and women was, in our view, also a correct approach because banks have been found reluctant to properly look after these areas owing to a variety of reasons. So far as social safety nets are concerned, it is widely believed that the money is doled out to favourites and in a non-transparent manner. A platform is therefore obviously needed to correctly identify the poor for cash transfers and other social programmes and improve the service delivery systems. Hopefully, the FGDP will fill this gap. Tourism is also a neglected sector in Pakistan. It is expected that dollar 50 million for Punjab tourism will help improve the quality of infrastructure in the province which may also enable the country to earn more foreign exchange. Another quality of the World Bank loans is that they are relatively inexpensive compared to other sources.

It is quite evident, however, that the benefit of the World Bank loans will depend on their effective utilisation. Unfortunately, our record in this regard is not inspiring. The authorities of the country usually seek such loans for balance of payment purposes. Financing needs of annual budgets are also addressed through a recourse to WB loans. Such an attitude would increase the debt servicing of the country in the coming years and at the present rate of C/A deficit, the country will not be able to easily payback its loans in foreign exchange. In order to avoid such an unpleasant situation, it will be in the interest of Pakistan to initiate a reform agenda on its own to balance the budget and earn a surplus in the external sector so that continuously rising public debt does not become a problem in future.

Copyright Business Recorder, 2017