KEY POINTS
- International Finance Corporation’s estimated $2b annual inflow to make the private sector more productive
- Public-private partnership under the World Bank Group-funded country partnership framework to rehab sick state-owned enterprises
- Comprehensive intervention targets improvement in health, education, social safety, energy, air quality, climate resilience and private sector productivity.
- Federal and provincial governments, the private sector, civil society, media are CPF implementation partners
- Country Partnership Framework aligned with the “Uraan Pakistan” comes with a mid-term Performance and Learning Review
ISLAMABAD: Pakistan is expected to receive $3 billion to $4 billion from the World Bank Group (WBG) under the $40 billion Country Partnership Framework (CPF), starting in the financial year 2025-26. This partnership, which will run until June 30, 2035, aims to support the country’s key development priorities.
The 10-year CPF, announced last month in Washington and launched in Islamabad earlier this month, includes $20 billion from the World Bank “indicative” lending envelope, $14 billion from International Development Association (IDA)—the development financing institution of WBG—and $6 billion from the International Bank for Reconstruction and Development (IBRD), the main lending arm of the Group, according to a senior official at the World Bank’s resident office in Islamabad, who requested not to be named.
Funding breakdown
The CPF document available on the World Bank website states that subject to the macroeconomic outlook and an improving business environment, International Finance Corporation (IFC)—the commercial lending arm of the Bank—aims to sustain its recently scaled-up programme, notably by diversifying its portfolio/product mix, while Multilateral Investment Guarantee Agency (MIGA)—a member of WBG)—will seek to leverage the WBG Guarantee Platform instruments to support private investment.
The role of IFC and MIGA
The International Finance Corporation (IFC), the commercial lending arm of the World Bank Group, will continue to emphasise its countercyclical role while ramping up public-private partnerships and advisory work. Annual commitments are expected to remain in the US$1.5 billion to US$2 billion range, with increased leveraging of World Bank lending as well as the suite of guarantees instruments, to support cross-border investment, lending, and trade finance.
It will also strive to leverage blended finance to help de-risk projects and encourage private sector participation in underinvested priority areas, including sectors that require affordable local currency to ensure a more sustainable model of financing. MIGA will continue to support its US$205 million portfolio and will explore new opportunities leveraging the WBG Guarantee Platform.
In the CPF document, all commitments are categorised as “indicative” the official explained by saying that “WBG uses a debt sustainability framework to determine indicative debt thresholds for countries. These thresholds are based on a country’s historical performance, growth outlook, and other factors.
The thresholds help determine a country’s risk of debt distress and access to financing. The World Bank’s debt sustainability framework (DSF) uses a composite indicator to assess a country’s debt risk. The framework considers a country’s: historical performance, outlook for real growth, remittance inflows, and international reserves,” the official maintained.
The financing in terms of grants, soft loans, development financing, project finance, equity investments, and political risk guarantees would help Pakistan improve most vulnerable sectors including health and nutrition, basic education, social safety, clean energy, air quality, climate resilience and struggling private investments.
Key focus areas
Addressing the challenges, Pakistan is facing in the above-mentioned selected areas, the CPF aims at six country outcomes including reduced child stunting, reduced learning poverty, increased resilience to climate change, cleaner energy and better air quality, more public resources for inclusive development, and last but not the least more productive private investment.
These outcomes will be supported by cross-cutting interventions in social safety nets and financial inclusion to support and protect the most vulnerable populations, particularly women, as well as digital and transport connectivity.
Achieving these ambitious goals will require leveraging resources through enhanced private sector engagement and increased joint financing and coordination with other development partners, observed the World Bank officials in the January 14 press release.
Long-term strategic shift
According to the officials, the World Bank has proposed this long-term framework as an “anchor” for a joint commitment to address Pakistan’s most acute development challenges.
Coming up with a new approach as a departure from the previous one of the contributing finance short-term adjustments cycles, the CPF would have a mid-term Performance and Learning Review (PLR), as well in FY 2029-2030 or in the World Bank terminology FY30.
The new approach is structured to durably and credibly anchor the World Bank Group’s partnership with Pakistan on addressing the country’s human capital crisis, its exceptional exposure to impacts of climate change, its high cost of energy and hosting among the worst air quality hotspots in the world.
“Support for policy reforms that boost private-led growth and create fiscal space to durably finance investments needed to address these challenges will remain key to our engagement in partnership with the International Monetary Fund, the Asian Development Bank, and others,” state the World Bank officials in the CPF document summary.
The balance of financial assistance will be focused on supporting longer-term development needs, which have suffered from chronic underinvestment in recent decades,” they added.
World Bank officials say that for the first time, WBG is coming to Pakistan in a big way with mega commitments, a new long-term as well as comprehensive approach to development partnership. In the Pakistan Country Partnership Framework, almost all the Group members namely IBRD, IDA, IFC, and MIGA except ICSID are contributing simultaneously.
Historical context
The IBRD, established in 1944 and headquartered in Washington, DC, United States, is the lending arm of the World Bank Group. It offers loans to middle-income developing countries. It is the first of five-member institutions that compose the World Bank Group.
It has provided over $48.3 billion in assistance and has invested approximately $13 billion to advance private sector-led solutions, and MIGA has provided $836 million in guarantees. The current portfolio for IBRD, IFC and MIGA in Pakistan includes 106 projects and a total commitment of $17 billion.
The International Development Association (IDA) is a development finance institution which offers concessional loans and grants to the world’s poorest developing countries.
The International Finance Corporation (IFC) is the commercial financing arm of the World Bank that offers investment, advisory, and asset-management services to encourage private-sector development in less developed countries.
The Multilateral Investment Guarantee Agency (MIGA) offers political risk insurance and credit enhancement guarantees. These guarantees help investors protect foreign direct investments against political and non-commercial risks in developing countries.
The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and States. It is also part of and funded by the World Bank Group.
