Government and bureaucratic apathy leave loans unutilised
With the country’s macroeconomic situation deteriorating sharply due to decades of neglect, a near-default situation was recently narrowly averted only by some friendly countries chipping in with generous assistance. The precarious foreign exchange reserves were temporarily ‘stabilised’, but the underlying flaws plaguing the economy are so many and so grave that they demand stringent regulatory, institutional and policy reforms. A strong political will or drive towards this end has always been lacking, as political leaders are loath to introduce reformist agendas which could end in popular backlash. One aspect of the overall fiscal decline is that foreign donors, obviously wary after unfulfilled pledges of change by successive governments, have started to drive a hard bargain in their ‘conditional’ loaning, with harsh financial stipulations and watertight provisions to ensure that requisite targets are met according to the bailout programme.
Despite the desperate need of foreign funding at this critical juncture, oftentimes loans already sanctioned are eventually cancelled over policy differences with Pakistan’s Public Procurement Regulatory Authority, lost in vast bureaucratic labyrinths, or become victim to some relatively trivial lapse, such as non-appointment of staff in time, but the government of Pakistan is still duty bound to pay substantial commitment charges to the World Bank, IMF and other donors for the sanctioned but undisbursed amount. As early as December 2018, the WB cancelled a $250 million soft loan under the concessionary International Aid Association for emergency relief and disaster management over macroeconomic guidelines divergence. A loan request for $400 million sought from the WB in February 2019 to improve FBR effectiveness, remained pending with the Economic Affairs Division, perhaps because the lender, keenly aware that a $150 million loan disbursed earlier for the same purpose achieved zero results, desired a 20 percent cut in FBR employees. With the latest IMF talks in the doldrums and our WB indebtedness reportedly standing at $18.3 billion, it is amazing that a $2.3 billion WB loan, part of a bigger $7.4 billion package, to fund various development projects under the federal and provincial governments, still remains unused, reportedly because of bureaucratic bickering, while commercial borrowing from Saudi Arabia, the UAE and China continues unabated. But now there is no more room for complacency and wiles.
