08/09/2008
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WB’s $500mn flying aid flops before release
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Muhammad Ali Qaisar
KARACHI: The World Bank (WB) has decided against providing Pakistan a $500 million emergency relief package. This withdreawal has boosted negative sentiments amongst the masses in the economic, political and financial circles. A big proportion of population has termed it as West’s conspiracy against Pakistan.
According to details the package which is scheduled to reach in mid September has now been cancelled without declaring any specific reason by the World Bank.
However, such a refusal by WB has sent the concerned local authorities in a wave of shock with no options for having any emergency financial support to offset the pressure on the ailing economy.
Economists and analysts have described the situation worrisome for both the economy and capital markets where the stakeholders are already paying a high price for the increase in international commodity prices and the prevailing local political turbulence for the last 6 months.
Therefore, they have turned it to be the west conspiracy against Pakistan to force it to increase its sacrifice against terrorism in which according to them Pakistan, despite several efforts, not able to achieve the desired results.
Analysts say that this step is not beneficial for the market as it would directly give a hit to the investors' sentiments that were already under severe stress for the last couple of months and who were finding an exit due to their huge exposures.Especially, this situation would further erode the confidence amongst foreign investors who are still holding approximately to around 25 per cent of the market's free float. He also said that this would trigger off market transactions and create further panic in the SCRA balances. On the other hand analysts say that declaration by the Ministry of Finance stating the foreign exchange reserve size to shorten up to $8.89 billion, will also worsen up the sentiments.
Most analysts believe that a fear about the downgrading of Pakistan's Sovereign Currency rating by the Moody's, weakness of the rupee and the absence of foreign buying could take further toll if sanity did not return to economic and political maneuvering under the national interest. Likewise various economists have also turned this situation as anti-resilience to the economy.
At this point when the news regarding country's expected default is coming from various circles, the draw back by WB from its commitment won't create positive impact, they commented. Though, people's eye would be stuck towards the oil import deal with Saudi Arabia and inflows from some multilateral agencies as per agreement, however, to stabilise the depleting reserves emergency relief package still holds an important key, a currency dealer told.
Pakistan had made a formal request to the World Bank some three months back for getting from it a $500 million emergency package when 'Finance Minister' Ishaq Dar led a delegation to visit Washington for talks with World Bank and IMF. This was followed by a number of meetings between government officials and World Bank authorities.
Interestingly, the World Bank had set a number of harsh conditionality for Islamabad to qualify for $500 million special emergency package, and the government had taken a number of measures to meet most of them and which also ironically earned it a huge criticism.
These included deletion of subsidies the government was picking up on petroleum products and rising electricity rates out of any proportion for all consumers categories.
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