World Bank blocks assistance on "low Pakistan's ratings"

[Naveed Yaseen]

(Naveed comments: It appears likely the actual reason is shortage of funds from donors)

AHMED MUKHTAR
ISLAMABAD (January 21 2009): The World Bank has blocked lending for two key loans, of at least $834 million, market-based loans due to the country's low credit ratings, an official said. "This project will be placed on hold until further notice", says a WB document about the national expressway project.

And, about $200 million National Trade Corridor (NTC) Improvement Program, the Bank document says: "Pending improvement of the macro-economic situation, this project will be put on hold until further notice". The WB is processing 12 loans of $1258 million for Pakistan, of which, most are of IBRD (WB) or market based, and only around $200 million is concessional credit from IDA--a subsidiary of WB.

"After Pakistan's rating went too low, there was no option with the bank to block its aid, which is based on costly market based IBRD loans, and these two loans suffered it directly", said the official. Another $300 million IDA facility of Poverty Reduction Strategy Credit (PRSC) is under process, which is likely to be approved before June 2009. Advisor to PM on Finance Shaukat Tarin is hopeful to get this credit during the current quarter.

Standard & Poor's had fixed Pakistan's sovereign rating at CCC-plus in December 2008, and Moody's set B2 negative rating in September 2008. The two direct loans, hit by this low ratings, are National Expressway $634 million IBRD loan, and NTC program loan.

The list of World Bank's projects in pipeline for Pakistan includes $100 million IBRD Higher Education Support Program; $50 IDA million Mineral Sector Technical Assistance; $26 million IDA Thar Coal and Power Technical Assistance; $124 million IBRD Rural Telecommunications and e-Service; $100 million IDA Second Sindh Structural Adjustment; $50 million IDA Support to Safety Nets; $634 million IBRD National Expressways; $25 million IDA Trade and Transport Facilitation II; $200 million IBRD National Trade Corridor Improvement Program; $100 million Punjab Large Cities Development Policy; $120 million Second Punjab Barrages Rehabilitation and Modernisation.

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