The World Bank has dealt a major blow to Pakistan by delaying the approval of two loans worth $1.1 billion until the next fiscal year, according to a media report. The Washington-based lender has also opposed the imposition of a flood levy on imports, creating a new hole in an already ambitious $32 billion annual financing plan.
The decision to withhold approval of the second Resilient Institutions for Sustainable Economy (RISE-II) loan worth $450 million and the second Programme for Affordable Energy (PACE-II) worth $600 million will be a major setback for the government.
The indicative date for the World Bank’s Board discussion of the RISE-II project is the fiscal year 2024, which will start on July 1, 2023, and end on June 30, 2024, a spokesperson said. The Bank’s documents also showed that the PACE-II loan might be approved in the next fiscal year.
The government had hoped to receive approval for at least the $450 million loan in January, which would have unlocked another $450 million from the Asian Infrastructure Investment Bank (AIIB) which had pegged a $450 million loan with the approval of the World Bank’s RISE-II.
The coalition government was already struggling to revive the International Monetary Fund (IMF) program. The World Bank’s latest decision, however, has created a hole of $1.5 billion against the government’s annual financing plan.
The World Bank’s opposition to the flood levy on imports is also a significant setback for the government. The lender sees the imposition of further taxes on imports as a bad policy choice that is discriminatory, distortive, and leads to a reduction in the production capacity of the country.
As an alternative, the government has options like the withdrawal of custom duty exemptions that have been made available to certain groups, which are protected under the 5th schedule of the Customs Act.
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