Tuesday, 26 May, 2009
RAWALPINDI: The government is expected to launch a $625 million social safety net system during the financial year 2009-10 for which it has sought financing of 200 million dollars from the International Development Association (IDA), it has been learnt.
The board of World Bank Group is expected to approve the financing of the new programme in Washington next month before the government announces its budget 2009-10.
The remaining financing of 425 million would be arranged by the federal government from its own sources.
The IDA credit would be transferred to the federal government in accordance with the terms of the financing agreement between Pakistan and the World Bank Group.
The implementation and monitoring of the safety net reforms are currently being managed by Benazir Income Support Programme (BISP), while the ministry of finance coordinates the overall reform agenda with the assistance of the Planning Commission.
The new safety net system will provide the chronic and transient poor with both basic income support and access to opportunities for graduating out of poverty.
Specifically, the financing will support the establishment of an appropriate policy framework for an efficient national safety net system including the development of sound institutions for the effective implementation of the BISP, sources said.
At the same time, a World Bank report says, while potential benefits to the proposed operation are very significant, there are also substantial political, economic and implementation risks.
Explaining the political risks, the World Bank report says attaining a sharp reduction in the fiscal and current account deficits will require political leadership and cohesion.
The scale and speed of the required economic policy response to the macro-economic imbalances to improve economic growth and poverty reduction prospects in the long run could intensify social tensions in part of the population.
The sustainability of the programme could also be undermined by possible differences among the countrys main political parties on other issues including constitutional reforms and the security situation.
The development of a well-governed and targeted safety net could help mitigate the economic and social impact of necessary structural reforms on the poorest segments of the population, promoting social peace.
In addition, the involvement of parliamentarians in the initial beneficiary selection could also pose a major risk to its governance.
The development of effective institutions and strong monitoring and evaluation systems that can provide information on programme performance and gain the confidence of the public could mitigate this risk.
The consensus across the political spectrum on the need for a safety net programme will also ensure continuity of the programme though the name or institutional home may change.
On the external side, a renewed rise in international energy and commodity prices, a reduction in foreign remittances especially from the countries of the Middle East, and a further deterioration in the world economy and international financial markets could weaken the export sector, reduce household transfers, lower capital inflows, limit economic growth and reduce flexibility for policy reforms.
Owing to these reasons, the external imbalances may continue to widen despite the short-term measures taken.
On the internal side, the inability of government to restore fiscal and external balance as agreed could reduce business and consumer confidence.
This could cause a fundamental shift in market expectations and a loss of confidence at home and abroad, leading to a sudden reversal of financial assets held in Pakistans stock and bond markets.
RAWALPINDI: The government is expected to launch a $625 million social safety net system during the financial year 2009-10 for which it has sought financing of 200 million dollars from the International Development Association (IDA), it has been learnt.
The board of World Bank Group is expected to approve the financing of the new programme in Washington next month before the government announces its budget 2009-10.
The remaining financing of 425 million would be arranged by the federal government from its own sources.
The IDA credit would be transferred to the federal government in accordance with the terms of the financing agreement between Pakistan and the World Bank Group.
The implementation and monitoring of the safety net reforms are currently being managed by Benazir Income Support Programme (BISP), while the ministry of finance coordinates the overall reform agenda with the assistance of the Planning Commission.
The new safety net system will provide the chronic and transient poor with both basic income support and access to opportunities for graduating out of poverty.
Specifically, the financing will support the establishment of an appropriate policy framework for an efficient national safety net system including the development of sound institutions for the effective implementation of the BISP, sources said.
At the same time, a World Bank report says, while potential benefits to the proposed operation are very significant, there are also substantial political, economic and implementation risks.
Explaining the political risks, the World Bank report says attaining a sharp reduction in the fiscal and current account deficits will require political leadership and cohesion.
The scale and speed of the required economic policy response to the macro-economic imbalances to improve economic growth and poverty reduction prospects in the long run could intensify social tensions in part of the population.
The sustainability of the programme could also be undermined by possible differences among the countrys main political parties on other issues including constitutional reforms and the security situation.
The development of a well-governed and targeted safety net could help mitigate the economic and social impact of necessary structural reforms on the poorest segments of the population, promoting social peace.
In addition, the involvement of parliamentarians in the initial beneficiary selection could also pose a major risk to its governance.
The development of effective institutions and strong monitoring and evaluation systems that can provide information on programme performance and gain the confidence of the public could mitigate this risk.
The consensus across the political spectrum on the need for a safety net programme will also ensure continuity of the programme though the name or institutional home may change.
On the external side, a renewed rise in international energy and commodity prices, a reduction in foreign remittances especially from the countries of the Middle East, and a further deterioration in the world economy and international financial markets could weaken the export sector, reduce household transfers, lower capital inflows, limit economic growth and reduce flexibility for policy reforms.
Owing to these reasons, the external imbalances may continue to widen despite the short-term measures taken.
On the internal side, the inability of government to restore fiscal and external balance as agreed could reduce business and consumer confidence.
This could cause a fundamental shift in market expectations and a loss of confidence at home and abroad, leading to a sudden reversal of financial assets held in Pakistans stock and bond markets.
