Another Setback: WB Links Approval Of RISE-II With IMF Loan

Another Setback: WB Links Approval Of RISE-II With IMF Loan
The World Bank has hampered Pakistan's attempts to obtain loans from multilateral lenders by tying approval of the second RISE-II (Resilient Institution for Sustainable Economy) loan to the completion of the stalled IMF program, The News reported on Tuesday.

The RISE-II initiative of the World Bank calls for $450 million in financing.

Pakistan hopes to acquire $700 million in program loans during the current fiscal year 2022-2023 thanks to co-financing from the Asian Infrastructure Investment Bank (AIIB) and additional funding of $250 million.

However, the conclusion of the ongoing IMF review and macroeconomic stability have both been prerequisites for the approval of the second RISE plan.

Since both parties have been involved in negotiations since February but the staff-level agreement has not been fulfilled, the renewal of the IMF plan has so far proven to be a difficult nut to crack.

Even though it has been almost three months, no staff-level agreement has been achieved, primarily because the gross external financing gap could not be closed to the Fund's satisfaction.

At the conclusion of their in-person negotiations on February 9, Pakistan and the IMF determined that Pakistan needed $7 billion in gross external finance for the current fiscal year.

The IMF reduced the need for external funding to $6 billion and then to $5 billion in light of the improvement in the current account deficit, which ultimately converted into a surplus of $654 million for the most recent month.

Pakistan received confirmation on the financing of $2 billion from Saudi Arabia and $1 billion from the United Arab Emirates, out of $5 billion in external financing needs. Formal agreements, though, have not yet been made.

However, according to the Pakistani government, written agreements have already been exchanged, and this will continue.

The $2 billion in external money still has to be provided. The World Bank and AIIB were supposed to distribute $700 million in program loans during the current fiscal year, according to the Pakistani authorities.

Pakistan anticipates receiving $300 million in project funding for flood-affected areas from overseas donors out of the remaining $1.3 billion by the end of June 2023.