ISLAMABAD: Pakistan is all set to secure $1.2 billion additional funding from the IMF through Climate Finance in order to augment the existing $7 billion Extended Fund Facility (EFF). With the possibility of this approval, the size of the IMF funding might increase to $8.2 billion for Pakistan.
Currently, the IMF review mission has been visiting Pakistan for undertaking the first review under EFF arrangement and releasing a second tranche of $1 billion. Pakistan had placed its formal request for the provision of the Resilience and Sustainability Facility (RSF) arrangement. It was expected that the IMF’s Executive Board might consider augmentation of EFF loan with an additional loan of $1.2 billion on the occasion of consideration of first review and release of second installment by end April or early May 2025. But all this is going to happen only if the Fund staff evolves consensus on staff level agreement during the ongoing parleys between the visiting IMF review mission and Pakistani team.
The IMF’s Climate Mission had recently discussed imposition of Carbon Levy which was although resisted by Pakistani authorities but Fund was still insisting that Pakistan would have to generate domestic resources for ensuring sustainability of climate resisting initiatives.
In this regard, the government of Pakistan has prepared a Climate-Public Investment Management Strategy (C-PIMA) to satisfy the IMF.
This report shared with the IMF says that the financial constraint results in a meager allocation for the Public Sector Development Program (PSDP).
The low allocation for PSDP and inclusion of new projects puts a negative impact on economic development. Major challenges in PSDP include: – Limited fiscal space, yet large number of projects in PSDP – Completion of the lesser number of on-going projects – Thin allocations resulting in cost and time over run, coupled with an ever-increasing throw forward – Capacity issues including delayed appointment of Project Directors/ Project Staff and suboptimal utilization of resources – Difficulty in providing O & M funds (recurring) to maintain the existing assets; and – Lack of Sectoral Priorities and Criterion for PSDP Approval of Concept Note Feasibility Studies Financially Viable or Made Viable by VGF under PPP Private Sector Commercial Nature Projects Economically and Socially Viable/Desirable Rank All viable Projects High Rank Projects included in PSDP.
The sectoral priorities should be aligned with Long Term Plan/ Vision, Medium Term Plan/ Five Year Plans/ 5Es framework and Annual Plans. The sectoral priorities should be formulated, keeping in view the existing portfolio of the line Ministries. Economic Affairs Division (EAD) should provide firmed up foreign aid estimates to be disbursed during the year for which PSDP is being formulated, with further two years’ projection in consultation with all stakeholders. Ministries/ Divisions should ensure allocation according to annual phasing of on-going projects while remaining within the Indicative Budget Ceiling (IBC).
Project Selection Criteria and Methodology: Factors to be Considered for Inclusion of Projects in PSDP i. Strategic and core on-going projects ii. Projects with 80% plus expenditure with realistic completion estimate iii. Exceptional and high scoring infrastructure projects iv. Pre-Scrutinized DDWP approved projects against given criteria v. Foreign funded projects with adequate rupee cover allocation within IBC vi. Provincial nature projects in 20 least developed districts vii.
Projects in Newly Merged Districts (NMDs) and other areas to ensure equitable regional development viii. PPP projects, where PSDP funding is either used as equity or as viability gap ix. Climate responsive & resilient projects x. Ready for Investment Projects 4.2 Ranking of Projects within Sector The ranking of the projects will be done by the Ministry/ Division concerned and be based on their absolute scores. Projects will be ranked in accordance with Sectoral Parameters given at Annex-I and will be considered for inclusion in PSDP, within sectoral Indicative Budget Ceiling (IBC), after meeting the demand for on-going projects.
The sectoral parameters are key determinants for improving quality of infrastructure and technical appraisal of the projects. Sectoral parameters would be taken into consideration for appraisal of each project related to that sector. Based on these appraisals, ranking would be given to each project and a list of investment ready projects would be maintained for inclusion in PSDP or investment through other modes.
