World Bank okays $304m loan for Punjab

ISLAMABAD: The World Bank’s Board of Executive Directors approved $304 million in financing for the Punjab Resource Improvement and Digital Effectiveness Programme (PRIDE).

This loan supports efficiencies in public resource management that generate savings and create fiscal space for growth generating investments in Punjab. “The PRIDE programme is integral to the World Bank’s whole-of-country approach in helping Pakistan strengthen public financial management systems at the federal and provincial levels,” said Najy Benhassine, World Bank country director for Pakistan. “Punjab is the largest province of the country accounting for 55 percent of the population and about 60 percent of the economy, so improving quality and access to public services is key to Pakistan’s development”.

According to WB’s prescription, Pakistan is at a crossroads as it deals with the COVID-19 pandemic. Periodic macroeconomic crises and a low human capital basis have constrained the country’s growth prospects. Over the last two decades, economic growth in Pakistan has averaged 4.4 percent a year, below the South Asian annual average of 6.3 percent. Low investment in human capital, slow progress of structural reforms, low private investment, and slow export growth due to an overvalued currency, among others, have hindered growth prospects. The country was making good progress in stabilising its economy and implementing much needed structural reforms. However, the COVID-19 pandemic will have significant negative impacts on the economy. The closure of businesses and disruption to the supply chains are significantly affecting the services and manufacturing sectors, which account for nearly 80 percent of total Gross Domestic Product (GDP).

The PRIDE programme will support the Punjab government in strengthening fiscal risk management and budget formulation to ensure reliable resource allocation for public services. The programme will improve revenue collection by increasing registration of businesses and real estate, and simplifying tax administration processes such as registration, filing,payment, refunds and appeals. In the wake of COVID-19, the programme also focuses on deploying technology-based solutions to enhance public service delivery and increase access to online services for firms and individuals. This will support Punjab in digitising key government services to streamline processes and increase efficiencies in the public service delivery.

“With prolonged restrictions on face-to-face services due to COVID-19, the PRIDE programme will help the provincial government expand its existing citizen feedback model and accelerate the use of technology for revenue mobilisation and public procurement,” said Akmal Minallah, task team leader for the programme. “The programme also puts in place monitoring and transparency mechanisms at the provincial and local levels that increase government accountability”.

Punjab is also one of the two provinces most affected by the COVID-19 pandemic. Government estimates show that Punjab could lose up to four percent of its GDP per month of lockdown. The economic downturn is projected to increase unemployment in Punjab by five to eight million, pushing many households below the poverty line. The province depends on federal transfers from the divisible pool of revenue for the bulk of its budget resources. Punjab has made efforts to increase its Own Source Revenues (OSR), mainly from provincial taxes, to increase investment in development priorities.

The economic fallout from the pandemic is, however, expected to reduce the province’s OSR, leaving it with fewer resources to finance its emergency response and to sustain the already modest investment in human capital and infrastructure.

PRIDE supports Punjab growth strategy and Punjab public financial management reforms strategy, which both aim at developing a robust public financial management system. The programme also aligns with the responsive investment for social protection and economic stimulus that the government of Punjab designed to stimulate recovery from the pandemic and increase resilience to future shocks. Together with PRIDE, these initiatives layout a roadmap for Punjab to accelerate digitisation of government services and ensure business continuity during emergencies. For programme of governance and anti-corruption arrangement, the World Bank document stated that in Pakistan, there exists an established anti-corruption framework comprising enabling legislation, anti-corruption investigating agencies, and a dedicated anti-corruption court system. Additionally, there are single-mandate and general mandate ombudsmen both at the federal and provincial level.

The borrower is committed to implementing the programme in accordance with the provisions of the Anti-Corruption Guidelines (ACG) (revised on July 15) applicable to PforR (programme for results) operations. The GoPb (Government of Punjab) will provide the World Bank with reports annually or more frequently as warranted, reporting any credible allegations of fraud and corruption received and registered under the programme as well as related investigations and, as needed, the actions taken. The reporting template will be agreed with the World Bank. Reciprocally, the World Bank will also share information on any allegations or concerns about fraud and corruption with the finance secretary.