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Wednesday, April 17, 2024

$23 billion in unpaid funds

Date:

Mostly slowed down by administrative obstacles and poor implementation

ISLAMABAD: Pakistan has not received about $23 billion in loans and grants from foreign creditors and donors, some of which date back as much as 15 years. This amount includes a $1.6 billion grant that Pakistan is owed by the United States under the Kerry-Lugar Act.

By ensuring that the schemes were implemented promptly, a significant portion of the funds—what the government referred to as the “undisbursed balance as of September 2022″—could have been received. Some of these loans were disbursed in accordance with the advancement of the foreign-funded projects, while others were postponed because of various administrative obstacles, poor implementation, and the nation’s relations with the donors.

While Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar have been working nonstop to secure $5 billion to $7 billion to revive the IMF programme, the funds, including grants worth $3.7 billion, remain unpaid.

The Ministry of Economic Affairs’ quarterly report, which was released this week and showed that project-level details of the schemes and funds were still stuck, made the revelations regarding the undisbursed funds.

The slow process of govern

ment approvals, delays in loan negotiations, a lack of coordination between government agencies finalising procurement details, protracted bidding processes, and a lack of capacity of the executing agencies in contract management and project monitoring, according to the sources, were the common causes of such significant amounts of unspent money.

Each case revolves around the inept bureaucrats handling the corresponding projects, including shoddy central follow-ups. The official information revealed that although international creditors and donors committed these loans to Pakistan, their disbursements were still pending. In addition, the nation is paying commitment fees on a portion of the idle money.

Of the $6.5 billion bailout package, the IMF has not yet disbursed $2.6 billion because neither side has been able to come to an agreement. The $6 billion loan package was initially granted by the IMF until September 2022; however, it was later extended for an additional nine months with only $500 million in new funding.

The programme, however, has once again gotten off track, and the government, which is led by the Pakistan Democratic Movement, has not adhered to the new schedule that was agreed upon with the international lender in August of last year.

By November 2022, the 9th review was supposed to be finished; however, this deadline has passed. The deadline for the 10th review, which involved a $750 million tranche, was February 3, 2023; however, this deadline has already passed because the 9th review is still unfinished.

Dar and Jameel Ahmad, the governor of the State Bank of Pakistan (SBP), were unable to provide a specific date this week for the renewal of staff-level agreement.

The official report reveals some troubling details about the non-disbursement of this foreign commercial loan, despite Pakistan’s best efforts to obtain them. Despite the fact that the loans’ expiration date was extended from 2017 to 2022, a $440 million foreign commercial loan from a consortium led by Suisse AG is still unpaid, according to the ministry’s report.

A $1.6 billion grant that the US had promised to the then-civilian government in 2010 as part of the $7.5 billion Kerry Lugar Act has not yet been paid out. The grants had been allocated for projects involving road infrastructure, municipal services, social protection, energy, and rural development.

36 of the 42 unfinished projects have already expired, proving that their development goals were not feasible.

Despite the completion period for all of the schemes having already passed many years ago, the $535 million UK grant was still unpaid. Some of these initiatives had started in 2007.

The World Bank did not disburse the maximum amount of $6.7 billion, primarily due to slow progress but also in part because of the customarily lengthy project completion times. Some of the World Bank loans intended to lower losses in the energy sector were not used by Pakistan.

Although the financial closure of the Karachi Port Improvement project was required by June 2018, some money is still awaiting disbursement. Similar to this, the $157 million Dasu Hydropower project, which started in 2014 and was supposed to be used by August 2022 but is still unfinished, demonstrates the Water and the Power Development Authority’s inefficiency (WAPDA).

As of the first quarter of the current fiscal year, payments totaling $4.8 billion for the project funded by the Asian Development Bank (ADB) were still due. The gestation periods for some of the ADB projects, which date back to 2006–2007, have long since ended.

A total of $1.4 billion in loans from China have not been disbursed, including $345 million for the Karachi Nuclear Power Plants, whose financial close date passed in June of last year.

Due to Pakistan’s failure to demonstrate progress on three water sector projects, the European Investment Bank has delayed disbursing $244 million despite the passage of time.

The $554 million grant from the European Union has not been utilised by the nation, and all EU-funded projects’ financial closing dates have now passed. The EU had given the grants for rural development, education and health sector projects. Even though the majority of the projects have expired, a German grant totaling about $236 million for various social sector projects has yet to be paid out. According to information provided by the ministry, Japan has also not paid out loans and grants totaling $321 million against projects, many of which have already expired.

Saudi Arabia has not yet paid out $743 million for 18 projects, the duration of which for 17 schemes has already ended.

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