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World Bank guarantees help Pakistan get cheaper, longer term loans from international market

Enrique Blanco Armas's picture
Dasu
Photo Credit: Pakistan's Water and Power Development Authority (WAPDA)

Compared to their investment needs, developing countries have very limited concessional financing available to them. International commercial banks are constrained in terms of the size and tenors of credits to Emerging Markets and Developing Economies. A key challenge therefore, is to channel large savings and capital into productive investments in developing countries, partly by ‘de-risking’ investments and borrowings.  Pakistan is at the forefront of these efforts, recently making use of two World Bank guarantees to access over 1 billion US dollars in two international commercial loan financings.

A $420 million IBRD Policy Based Guarantee (PBG) was approved by the World Bank Board alongside a $500 million IDA credit in June 2016. The PBG guarantee partially takes over the risk of a commercial bank’s loan to a government. The PBG and the IDA credit supported a program of reforms including the adoption of a new and more inclusive poverty line, efforts to broaden the tax base, enhanced transparency of State Owned Enterprises, improved debt management and a significant overhaul of the regulatory framework of the financial sector.  Improved access to international financing through the PBG will reduce the government’s dependence on domestic financing and free up resources for private sector investment. The guarantee also signals the World Bank’s confidence in Pakistan’s economic reforms program – a signal that is particularly important after the successful completion of the IMF program. The government used the US$420 million PBG to partly guarantee a 10-year US$700 million loan, extending tenor significantly and achieving cost savings.  

Seize the Opportunity to make Dhaka a Great, Vibrant City

Qimiao Fan's picture

The success of Dhaka, one of the megacities of the world, is critically important for the economic and social development of Bangladesh. The city's astonishing growth, from a population of 3 million in 1980 to 18 million  today, represents the promise and dreams of a better life: the hard  work and sacrifices made by all residents to seize  opportunities to lift themselves from poverty towards greater prosperity. 

 
 However, as Dhaka has grown to become one of the most densely populated cities in the world, its expansion has  been messy and uneven. Dhaka's growth has taken place without adequate planning, resulting in a city with extreme  congestion, poor liveability, and vulnerability to floods and earthquakes. Many residents, including the 3.5 million  people living in informal settlements, often lack access to basic services, infrastructure, and amenities. 
 
Unplanned and uncontrolled growth has created unprecedented congestion: the average driving speed has dropped  from 21km per hour 10 years ago to less than 7km per hour today. Continuing on current trends would result in a  further slowdown to 4km an hour — slower than the average walking speed! Congestion eats up 3.2 million working hours each day and costs the economy billions of dollars every year. Some of the most important economic benefits    from urbanisation are missed out due to this messiness, resulting in lower incomes for the city and the country.
 
These problems will not go away on their own. Dhaka's population is expected to double once again by 2035, to 35  million. Without a fundamental re-think requiring substantial planning, coordination, investments, and action, Dhaka  will never be able to deliver its full potential. Dhaka is at a crossroads in defining its future and destiny. 
 
Up to now, urban growth has mainly taken place in the northern part of Dhaka and expanded westward after the  flood of 1988, when the government built the western embankment for flood protection. This resulted in high-density  investments near the city centre, where infrastructure and social services were accessible. However, real estate investments were not coordinated with other infrastructure and transportation services. 

Local communities combat climate change in Bangladesh

Shilpa Banerji's picture
Mahfuzul Hasan Bhuiyan/World Bank
Bangladesh is among the most vulnerable countries to flooding and climate change impacts. Photo Credit: 
Mahfuzul Hasan Bhuiyan/World Bank

How can a country vulnerable to natural disasters mitigate the effects of climate change? In Bangladesh, resilient communities have shown that by using local solutions it is possible to combat different types of climate change impacting different parts of the country.
 
Every year, flash floods and drought affect the north and north-west regions. Drinking water becomes scarce, land becomes barren and people struggle to find shelter for themselves and their livestock. In the coastal districts, excessive saline makes it impossible to farm and fish.
 
The Community Climate Change Project (CCCP) has awarded grants to around 41 NGOs to address salinity, flood and drought-prone areas. With the help from local NGOs, communities innovated simple solutions to cope up with changing climate and earn a better living benefiting at least 40,000 people in the most vulnerable districts.
 
Raising the plinths of their homes in clusters has helped more than 15,000 families escape floods, and they continued to earn their livelihoods by planting vegetables and rearing goats on raised ground. Vermicomposting has also helped to increase crop yields. In the saline affected areas, many farmers have started to cultivate salinity tolerant crabs with women raising their income level by earning an additional BDT 1500 a month from saline tolerant mud crab culture in high saline areas.
 
Watch how communities use these three solutions to tackle climate change impacts.

Our commitment to the people of Afghanistan stays strong

Annette Dixon's picture
Also available in: دری | پښتو
Despite government efforts with support from the international community, Afghanistan's development needs remain massive. Photo Credit: Rumi Consultancy/ World Bank

I am still shaken and saddened by the many lives lost to the attacks in Kabul two weeks ago and since then there has been more violence. As we grieve these tragedies, now is the time to stand strong with the people of Afghanistan and renew our commitment to build a peaceful and prosperous country.

To that end, we announced this week a new financing package of more than half-a-billion dollars to help Afghanistan through its struggle to end poverty, increase opportunity to help stabilize the country, and ensure all its citizens can access basic services during a time of economic uncertainty.

Afghanistan has come a long way since 2001 and achieved much progress under extremely challenging circumstances. Life expectancy has increased from 44 to 60 years, maternal mortality has decreased by more than three quarters and the country now boasts 18 million mobile phone subscribers, up from almost none in 2001.

Yet, the development needs in Afghanistan remain massive. Nearly 40 percent of Afghans live in poverty and almost 70 percent of the population are illiterate. The country needs to create new jobs for about 400,000 people entering the labor market each year. The situation is made more challenging by the return of around 5.8 million refugees and 1.2 million internally displaced people.

Our new support is in line with our belief that Afghanistan’s economic and social progress can also help it address security challenges.  Our financing package meets the pressing needs of returning refugees, expands private-sector opportunities for the poor, boosts the development of five cities, expands electrification, improves food security, and builds rural roads.

Celebrating 15 Years of reengagement in Afghanistan

Raouf Zia's picture
Also available in: دری | پښتو




Shortly after the Soviet invasion in 1979, the World Bank suspended its operations in Afghanistan. Work resumed in May 2002 to help meet the immediate needs of the poorest people and assist the government in building strong and accountable institutions to deliver services to its citizens.

As we mark the reopening of the World Bank office in Kabul 15 years ago, here are 15 highlights of our engagement in the country:

Three key policies to boost performance of South Asia’s ports

Matias Herrera Dappe's picture



In a previous blog
we related how South Asia as a whole had improved the performance of its container ports since 2000 but had still struggled to catch up with other developed and developing regions. But within that picture, some ports did better than others. 

For example, Colombo in Sri Lanka, the fast-expanding Mundra and Jawaharlal Nehru Port in India and Port Qasim in Pakistan all improved the use of their facilities in the first decade of this century.  India’s Mumbai and Tuticorin were among those that fell behind. Colombo also improved its operational performance by almost halving the share of idle time at berth, while Chittagong (Bangladesh) and Kolkata (India) had the longest vessel turnaround times in the region.

Knowing how specific ports perform and the characteristics of ports that perform well and those of ports that perform poorly helps policymakers design interventions to support underperforming ports.

In the report “Competitiveness of South Asia’s Container Ports” we identified three interrelated policies to improve the performance of the container ports, a key element in one of the world’s fast-growing regions: increasing private participation in ports, strengthening governance of port authorities and fostering competition between and within ports: 

Building a more resilient Afghanistan

Ditte Fallesen's picture
Helping Afghanistan Become More Resilient to Natural Disasters


This blog is part of a series highlighting the work of the Afghanistan Disaster Risk Management and Resilience Program

During the almost 4 years I spent in the World Bank office in Kabul, I experienced frequent earthquake tremors and saw the results of the significant reduction in winter snow, which severely impacts the water available for agriculture during spring and summer.
 
While limited in scope, my first-hand experience with natural disasters adds to the long list of recurring hazards afflicting Afghanistan. This list is unfortunately long and its impact destructive.
 
Flooding, historically the most frequent natural hazard, has caused an average $54 million in annual damages. Earthquakes have produced the most fatalities with 12,000 people killed since 1980, and droughts have affected at least 6.5 million people since 2000.

Climate change will only increase these risks and hazards may become more frequent and natural resources more scarce. Compounded with high levels of poverty and inadequate infrastructure, the Afghan population will likely become more vulnerable to disasters.

Risk information is critical to inform development planning, public policy and investments and over time strengthen the resilience of new and existing infrastructure to help save lives and livelihoods in Afghanistan.

South Asia’s ports: Expensive and slow

Matias Herrera Dappe's picture
 
Are South Asia’s Container Ports Competitive?


Many countries, developed and developing, that want to become more competitive in global markets tend to jump to a quick conclusion that they need to invest more in infrastructure, particularly in transport sectors like ports. But while many regions, including South Asia, do face important infrastructure gaps, massive new investment is not the only way to improve regional competitiveness. Countries should realize that they also have significant potential to make more efficient use of the infrastructure they already have.
 
Building megaports all along the coast might reduce a country’s trade costs, but it also requires hundreds of millions of dollars in investment. Improving the performance of existing ports, enabling them to handle higher levels of cargo with the same facilities and in a shorter time, can be a far more cost-effective approach to reducing transport and trade costs. Closing the infrastructure gap does not just require more infrastructure, but also better infrastructure, and better use of existing infrastructure.
 
The report Competitiveness of South Asia’s Container Ports, which we launched today, provides the first comprehensive look at the 14 largest container ports in South Asia, which handle 98 percent of the region’s container traffic. It focuses on port performance, drivers, and costs. 

What do we know about South Asian ports?

Karla Gonzalez Carvajal's picture
 
 A Comprehensive Assessment of Performance, Drivers, and Costs
Cover of the upcoming report: Competitiveness of South Asia’s Container Ports : A Comprehensive Assessment of Performance, Drivers, and Costs


The World Bank is releasing its first-ever comprehensive study of container ports in South Asia, examining the competitiveness of major ports across the region and suggesting ways they can work more efficiently to boost trade.

The report, to be formally launched on April 27, examines the performance of the ports, which handle about 75 percent of the region’s trade by value, and assesses the role that the private sector, governance, and competition have played in their development.

Trade has been key to South Asia’s remarkable economic average annual growth rate of about 6.7 percent since the beginning of the century, the second-highest in the world after East Asia.

By improving the transport infrastructure, including ports, and easing bottlenecks that hinder the flow of goods, the World Bank is helping South Asia lower its high logistics costs, capture a bigger share of the global market and create more jobs, supporting its progress toward becoming a middle-income region.   
 

India’s Tryst with PPPs: The High, The Low… and The Revival?

Sri Kumar Tadimalla's picture
For a considerable period of time, on the score of mobilizing infrastructure investments through private participation among developing countries, India ranked 1st in Energy and Transport sectors.


In several economic infrastructure sectors, India enjoyed a strong track record of harnessing Public-Private Partnerships (PPPs). Private sector investments in infrastructure more than tripled from the 10th Plan Period (2002-07; INR 2 trillion) to the 11th Plan (2007-12; INR 7.3 trillion). Between these plan periods, private sector share in infra investments increased from 22% to 38%. For a considerable period of time, on the score of mobilizing infrastructure investments through private participation among developing countries, India ranked 1st in Energy and Transport sectors and 2nd in Telecom (behind Brazil).
 
This erstwhile success of India’s PPP program is attributable to well-crafted reform efforts by the government, and ably executed by the private sector, banks and other financial intermediaries. Following the economic liberalization initiated in the early 1990s, the government has created an enabling environment for private participation through several sector-specific and cross-sectoral initiatives, e.g., relaxing entry norms, tax concessions, independent regulation in telecom and power, mobilization of additional revenues through tolls and cess on fuel, establishment of a viability gap fund mechanism and India Infrastructure Financing Company Limited, etc.  The financial intermediaries, too, quickly moved up on a steep learning curve to cater to this new and challenging mode of delivering infrastructure services. Private sector responded enthusiastically and seized these opportunities to develop their own capabilities and progressively build larger and complex projects. Today, private sector operators are serving more than 90% of the mobile phone users, owning ~40% of the power generation capacity, built and operating a substantive portion of arterial network of national highways, besides world-class airports in four metros and container handling facilities at many ports.

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