The World Bank’s Board of Executive Directors has approved $500 million in financing for the Resilient Institutions for Sustainable Economy program (RISE) to help Pakistan strengthen fiscal management, promote transparency and private sector growth, and undertake foundational reforms in the energy sector to transition to low-carbon energy. These reforms are critical to build fiscal resilience and stimulate recovery from impacts of the COVID-19 pandemic.
“Pakistan is suffering a significant fiscal shock from the economic fallout from the pandemic and the increased spending on crisis response, including emergency healthcare, social protection, and business support,” said Illango Patchamuthu, World Bank Country Director for Pakistan.
“The RISE program supports the government efforts to achieve macroeconomic stability, accelerates long-delayed policy reforms, and sets the course for a strong and competitive economy.”
The program supports reforms to broaden the tax base and reduce distortions in tax policy, strengthen debt management and transparency, and implement urgently needed reforms to achieve financial viability of the power sector. In tandem, reforms to lower barriers to the formalization of firms, increase the use of digital payments, and better regulate real estate developments will help create an enabling environment to attract private investment.
“RISE supports reforms such as harmonizing sales tax and making the trade tariff structure more competitive. This could help the country attract new investments and spur economic recovery,” said Shabih Mohib, Lead Country Economist for the World Bank.“Taken as a whole, we hope that RISE can build a foundation for sustainable growth driven by the private sector.”
The program supports the foundations for a move toward a low-carbon and more financially viable power sector. The program includes reforms to improve the integrity of the banking sector, promote digital finance, and create a more competitive national tariff policy to promote trade and reduce costs to consumers. The digital finance component of the program will help deepen electronic money transactions and digital payments will benefit populations with limited mobility, such as women and low-income populations.
RISE is aligned with the government’s COVID-19 crisis response, which aims to scale up spending on health and social protection while pursuing macro-fiscal reforms in the face of economic contraction. RISE complements the Securing Human Investments to Foster Transformation (SHIFT) program, which focuses on human capital, and an upcoming Program for Affordable and Clean Energy (PACE), which will tackle power sector reforms. PACE, which will include critical power sector reforms needed to put the country on sustainable fiscal path, will precede the second programs of RISE and SHIFT.
The project will be financed by a $250 million credit from the International Development Association (IDA) and a $250 million loan from the International Bank for Reconstruction and Development (IBRD). The IDA credit has a maturity of 30 years with a 5-year grace period and the IBRD loan has a maturity of 25.5 years and 5.5-year grace period.