"Pakistan currently qualifies as a blend country and is eligible for both International Development Association (IDA) and IBRD. If a country's status changes the ongoing projects are not affected," said the World Bank (WB) spokesperson in Islamabad. However, the spokesperson added that budget support for any country is linked to maintenance of an adequate macroeconomic policy framework, as determined by the World Bank with inputs/assessment from the International Monetary Fund (IMF).
The WB had approved a Country Partnership Strategy (CPS) for Pakistan for the period of 2015-19. The CPS for Pakistan is structured to help the country tackle the most difficult - but potentially transformational - areas to reach the twin goals of poverty reduction and shared prosperity. The four strategic pillars - results areas - of the CPS are anchored in the government's framework of 4Es: Energy, Economy, Extremism and Education; and the priorities of the proposed Vision 2025.
The CPS envisaged an indicative financing envelope of about $11 billion over the CPS period. This includes an IDA lending of about $1.1 billion per year (subject to SDR/$ exchange rate). According to the CPS, the IBRD lending would require strengthened macroeconomic balances, evidenced among other things by foreign exchange reserves equal to at least 2.5 months of imports of goods and services and a stable or declining public debt to GDP ratio, lower than the 64.2 percent projected for end-2013/14.
IBRD lending is limited to investment lending of $500 million a year and a maximum of $2 billion in total over the CPS period. Within this, lending amounts would be further modulated according to improvements in Pakistan's credit worthiness, and would also depend on IBRD's lending capacity and demand from other borrowers.
If the program performs well, the World Bank may be able to bring in additional IBRD lending, but if reforms are not maintained, the World Bank could not continue its Development Policy Financing. It would need to reorient its program, while maintaining the critical social sector support. Any such shifts or reorientation would be brought to the Board in the Country Partnership Strategy Progress Report (CPSPR).
A State Bank of Pakistan (SBP) official told Business Recorder that latest figures of foreign exchange reserves were released on August 10, 2017 which indicate reserves stood at $14.398 billion on August 4, 2017, $14.698 billion on July 28, 2017, $15.003 billion on July 21, $15.478 billion on July 14, and $16.197 billion on July 7, 2017 registering a consistent decline of $1.8 billion during last one month.
Continued decline in foreign exchange reserves is posing a serious threat to the country's eligibility for getting financial support from IBRD in the coming years.
Copyright Business Recorder, 2017