ISLAMABAD: The International Monetary Fund (IMF) has recommended that Pakistan revive its five-year development planning, implement climate-sensitive public investment management plans, and disclose criteria for project appraisals to enhance transparency. These measures aim to attract global climate financing.
The IMF’s advice comes in the wake of both sides achieving a staff-level agreement on the initial review of a $3 billion bailout. Following this development, Interim Finance Minister Dr. Shamshad Akhtar publicly announced the postponement of a conventional $1.5 billion Eurobond issue for this year. There is also a contemplation of a potential requirement for a more extended IMF loan deal shortly after the February elections.
Simultaneously, authorities intend to adhere to the stringent fiscal and monetary policies outlined in the existing loan agreement with the IMF. The goal is to accumulate foreign exchange reserves to improve the credit rating, paving the way for issuing a green bond known as the Environmental, Social, and Governance (ESG) bond.
Given the recurrent occurrences of natural disasters, international donors seem hesitant to allocate scarce resources from their taxpayers unless comprehensive climate-resilient and adaptation measures are in place.
The IMF has found faults with Pakistan’s decision to skip five-year plans in 2018 after the 11th such plan and advised the government to revive medium- and long-term planning in which climate-sensitive investments become part of public investments.
The IMF said in its technical report released on the weekend, “To enhance urban resilience, a nationwide strategy is needed, as well as adaptation plans at the provincial and city levels.”
The report urged the Ministry of Finance to monitor the fiscal risks of public investments at the provincial and federal levels and at the local government stage and state-owned entities with large development footprints, such as the Water and Power Development Authority (Wapda) and the National Highway Authority (NHA).
The International Monetary Fund (IMF) has advised Pakistan to formulate a five-year strategy by December 2024. This strategy should encompass significant projects across all sectors and delineate funding sources.
The objective is to guide sectoral investment plans and enhance the appraisal process, specifically focusing on large projects. The IMF recommends increasing independent scrutiny, refining the appraisal process, and providing guidance on critical inputs.
Furthermore, the IMF has called on authorities to enhance the information, scrutiny, and coordination of significant projects, irrespective of their funding sources, while also addressing potential fiscal risks. The government is encouraged to include in the budget documentary summary information on critical aspects of the Public Sector Development Program (PSDP) and make these criteria public to ensure transparency.
In response to the sizable portfolio of around Rs11 trillion, the IMF suggests a one-time review of all technically approved projects. The aim is to identify high-priority projects within this extensive portfolio, which, if left unaddressed, would require over 14 years to complete with minimal intended outcomes.
The IMF noted that Pakistan, which had a well-established tradition of five-year national planning dating back to 1955, discontinued this practice in 2018. The existing planning documents lack cost estimates and fail to incorporate measurable outcomes.
The current national planning document, ‘Vision 2025’, was adopted in 2011. However, it is an aspirational document outlining seven development pillars and their goals. Notably, it does not specify the key investment projects, their associated costs, or their role in realizing the outlined goals.
The IMF said, “The lack of medium-term planning document means that in practice, there is a missing link between the annual budget, investment plans, and the objectives of Vision 2025.”