Setback for Pakistan as WB â€˜refusesâ€™ to fund Diamer-Bhasha * Bank approves $12 billion five-year assistance package, but no financing for dam * Loans to be repaid in 30 years, with 2% mark-up SLAMABAD: The World Bank (WB) Group has now approved a package of assistance worth $1 billion to support Pakistanâ€™s economic reforms, besides giving it $11 billion under a five-year Country Partnership Strategy. However, it has declined to finance the much-needed 4,500MW Diamer-Bhasha Dam during the next fiver years (2015-2019). The assistance package, which was approved by the WB Board of Directors on Thursday, consists of two Development Policy Credits (DPCs) to support the Pakistani governmentâ€™s efforts to improve the power sector, and reinvigorate growth and investment for reducing poverty and creating shared prosperity. However, Pakistan faced a serious setback, as the WBâ€™s CPS 2015-2019 did not include financing of the Diamer-Bhasha Dam that has the capacity to produce 4,500MW electricity to bridge the widening demand and supply gap of electricity. Addressing a press conference through a video link from Washington, World Bank Country Director for Pakistan Rachid Benmessaoud said the government should give independence to NEPRA towards determining power tariff, and that there was no connection between the approval of the loan and the increasing power tariff. He also said poverty trend in Pakistan was on the declining side, as the government had initiated several programmes for poverty eradication. â€œHelping Pakistan in deepening multi-sectoral policy reforms and performance-based investments in the social and human development sectors has guided the bank groupâ€™s assistance strategy in Pakistan over the last few years,â€ said Rachid Benmessaoud, adding, â€œIn formulating the new Country Partnership Strategy, a wide range of stakeholders, including civil society, media, youth, parliamentarians, and federal and provincial governments, were consulted.â€ He also said the new strategy was structured to help the country tackle the most difficult, but potentially transformational, areas to reach the twin goals of poverty reduction and shared prosperity. Benmessaoud also said the WBGâ€™s Pakistan Country Partnership Strategy was anchored in the governmentâ€™s framework of 4Es â€“ energy, economy, extremism and education â€“ and the initial priorities of the incoming Vision 2025. Enough flexibility has also been built into the strategy to allow for quick reallocation of resources in case of unforeseen needs or emergencies. Giving details of the assistance, the World Bank country director said that the WBG had approved a package of assistance worth $1 billion to support Pakistanâ€™s economic reforms. Talking about the assistance of $1 billion, the country director said that $600 million (with additional co-financing support of the Asian Development Bank and the Japan International Credit Agency) supports Pakistanâ€™s goal of developing an efficient and consumer-oriented electric power system that meets the needs of its people and economy, sustainably and affordably. The two credits are financed by the International Development Association (IDA), and would be on standard IDA terms, with a maturity of 25 years, including a grace period of 5 years. Meanwhile, the Finance Ministry released a handout stating that the World Bank loans were purely concessionary in nature with repayment schedule spanning over a period of 30 years, including a five-year grace period, and the interest rate would be nominal at the rate of 2% per annum. It is expected that $1 billion would be transferred to Pakistan during the next week, and it will increase Pakistanâ€™s forex reserves substantially. The WB loan will incur 2% interest per annum and the Government of Pakistan would be saving net 10.5% in payment of interest on Rs 100 billion. Resultantly, there will be no net increase in the overall public debt. Setback for Pakistan as WB â€˜refusesâ€™ to fund Diamer-Bhasha ****************************************************************************** It is good that the World Bank is giving money to Pakistan, which is rather badly cash strapped. The only issue is the repayment. It will be a burden on Pakistan and can lead to defaulting on repayment. Is that the reason why the WB did not want to finance the Diamer-Bhasha Dam that has the capacity to produce 4,500MW electricity to bridge the widening demand and supply gap of electricity? But then hasn't a 5 year grace period also been built in? It is good that Pakistan is getting this huge amount at a throwaway interest rate of 2%. That is unfortunate since Pakistan is reeling in massive power cuts that reduces her standing with her people and with the world that Pakistan is a modern developing nation. However, it is good that enough flexibility has also been built into the strategy to allow for quick reallocation of resources in case of unforeseen needs or emergencies since Pakistan has in the past had repeated unforeseen needs and emergencies. Pakistanâ€™s goal of developing an efficient and consumer-oriented electric power system that meets the needs of its people and economy, sustainably and affordably is laudable, but the issue is, which has been identified by the WB, how can those in poverty pay competitive rates so as to make the power sector sustainable?