No Strings Attached?
The World Bank may have invested in a number of projects in Pakistan but lending policies often come with strings attached.
In the 1990s, the World Bank played a key role in assisting the establishment of the Hub Power project in Pakistan. The Hub Power Company or HUBCO emerged as a catalyst for energy development and continues to play that role even today. Pakistan’s economic growth in the second half of the 90s and in the first half of 2000s can be at- tributed to the development and stability of its energy sector. HUBCO’s stellar performance and consistent and adequate power supply encouraged others to invest in the energy sector, leading to subsequent private power plants and captive power plants.
The World Bank also initiated banking sector reforms in the mid-90s, ren- dering thousands of bank employees jobless. But the reforms gave birth to a sound banking system that helped in modest-to-high economic growth till 2007. Had those reforms not taken place, Pakistan’s banking system would have been painfully susceptible to the global financial crisis of 2007-2008.
Apart from these two major projects,
the Bank is actively engaged, mostly as a co-financier, in a number of projects throughout Pakistan. A senior official of the Ministry of Finance claims that some 30 plus projects have been approved by WB during the present PPP-led coalition government. These projects are diverse in nature; some are aimed at enhancing power projection capacity and strengthening the financial and infrastructure sectors, while others target uplifting socially disadvantaged sections of the population and promising better delivery of health and education services. The Bank has played a critical role in introducing the concept of micro-financing in Pakistan as well. Most importantly, all projects are geographically spread over a large part of Pakistan covering all four provinces.
Pakistan became a member of the World Bank in 1950 and began borrowing from it in 1952. The country also started borrowing from IDA since its inception in 1962. Therefore, the Pakistan-World Bank relationship spans over half a century and has survived both dictatorial and democratic regimes in Islamabad.
Pakistan has also remained in the list of the top ten recipients of WB financing and its economy has benefited in more ways than meets the eye. Whenever there is a qualitative change in the nature of Pakistan’s relationship with the US (the largest sponsor of the WB), the perception about the utility and real motives of WB programs comes into question. It is imperative that borrowing member countries focus on how they can strike an acceptable balance between the nature of their borrowing needs and the WB program. Pakistan is no exception.
Pakistan’s relationship with the World Bank spanning over five decades offers important lessons. Whether it is a change of regime in Islamabad or a change of heart in Pakistan’s relationship with America, the country has often amended the original features of its borrowing programs from WB and other multilateral lending agencies and casually approved them after some readjustments. The lack of consistency leads to one WB project continuing peacefully while the next may find itself in a shambles. Pakistan’s inability to secure enough financial support from the WB for its energy sector after the turn of the century is an obvious example.
But this is only one side of the coin. The other side, equally important, is whether the World Bank and other IFIs have remained faithful in financing development projects in Pakistan. Most international development projects come with strings attached and often try to influence a country’s economic decisionmaking to the point that its economic managers grow frustrated and want to abandon the project. The World Bank, unfortunately, has a healthy history of engaging in such practices.
Despite this, it is heartening to see that the WB has itself introduced an independent evaluation of its lending programs and the evaluators, drawn from both public and private sectors of the borrowing country and senior officials of the WB, plainly point out weaknesses in the philosophy, management and operational details of WB activities. One such report compiled in mid-2000s makes a candid observation “Beyond problems in the overall strategic thrust of the Bank’s program, the Bank failed to design a program that was realistic. The SAP (structural adjustment program) projects were the most extreme exam- ples of this failure, but the problems can be seen in other projects (as well).”
Three basic things that can define the scope of a future relationship between Pakistan and the Bank are Pakistan’s internal politics, the World Bank’s new strategy toward Asian economies and the overall global economic scenario.
Pakistan’s internal politics will determine, in large part, the country’s collective will to tap its own resources for expanding its economy. The World Bank’s strategy for development lending in Asia will certainly ascertain future volumes of lending to Pakistan and the overall global economic scenario can cause the direction-setting process both for borrowing countries and for the World Bank.
If judged by the current wave of nationalist and forward-looking politics of Pakistan, it can be assumed that the country will undertake serious measures to tap its domestic resources for growth. Any twist in its ongoing war on terror may change the quality of the efforts that would be made to achieve this goal, but the goal itself would remain unchanged in the foreseeable future. In return, the World Bank will have to provide increased volumes of lending to the Asian region and make it politically less painful for them to borrow.
Source: World Bank. (Figures rounded off)