Adviser to the Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh just witnessed the signing of three loan agreements with the World Bank for the country.
The Country Director of the World Bank Patchamuthu Illangovan signed the agreements on behalf of the World Bank while Economic Affairs Division Secretary Noor Ahmed signed the financing agreements on behalf of the Government of Pakistan. The representatives of the Higher Education Commission (HEC) and Government of Khyber Pakhtunkhwa were there to sign their respective project agreements too, as the loan includes plans for their specific departments. Here are 5 things to understand about this new loan deal: The total amount of the loans will come to US $918 million
With all the projects included, the overall loan is planned to be of around US $918 million to be divided into three separate projects. The purpose of these loans is for Pakistan to improve its efforts to “achieve the sustainable economic development of the country.”
‘Pakistan Raises Revenue Program’ — $400 million
The first programme to be run is aimed at “contributing to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance,”according to the Economic Affairs Division. It is expected that the programme will increase Pakistan’s tax to GDP ratio to 17%, increase the number of active taxpayers to 3.5 million, reduce the compliance burden of paying taxes and improve the efficiency of customs controls. ‘Higher Education Development in Pakistan’ — $400 million
The aim for this programme is to “support research in strategic sectors of the economy, improve teaching and learning and strengthening governance in the higher education sector.” The plan is to use this money towards nurturing academic excellence in strategic sectors, supporting decentralised higher education institutes for improved teaching and learning, equipping students and higher education institutions with modern technology, higher education management information system and data drive services and capacity building, project management and monitoring & evaluation. ‘Khyber Pakhtunkhwa Revenue Mobilisation and Resource Management Program’ — $118 million
This programme is being used to increase collection of KP’s own revenue and improve the management of public resources. “This objective is to be achieved through efficient revenue mobilisation, effective public resource management and capacity building to enhance e-government functionality,” a press release said. The program will help the government of Khyber Pakhtunkhwa to mobilise its own source revenue to and come up with the efficient and strategic use of the province’s financial resources. What will happend if we don’t pay? How long till when we have to pay back?
Like most loans, we have 3 years to pay it off. However, if we do not pay off the loans, we will be put on the World bank defaulters list, which could open us up to a number of different options. We may have put up something as collateral, and as such ownership over that may be at risk. Furthermore, sanctions or austerity measures can also be placed on Pakistan, placing the burden onto the population. Until the agreement is released though, this is all speculation.