Islamabad: World Bank on Monday capitulated and admitted to its negligence of overestimating Pakistan’s external financing needs for current financial year 2017-18.
This development comes amidst criticism by Pakistan of WB on Sunday of overstating Pakistan’s external payment obligations by $13b ($31b), which was $18b.
Profit reported on Monday that according to Finance Ministry, WB had wrongly included portfolio investment of amount Rs13.8b as part of repayment obligations, which overstated the external repayment obligations. International reporting standards don’t permit portfolio investment to be included when calculating gross financing needs of a country.
WB said to have “misrepresented” what the definition of gross financing needs of a country are. Pakistan’s real figure of gross financing need for FY 2017-18 is $18b and not $31b.
WB issued an apology after meeting a Pakistani delegation headed by Finance Secretary Shahid Mahmood, reported a local newspaper.
It admitted foreign portfolio investments did not constitute as a part of Pakistan’s external financing needs and hence gross external financing needs for this FY 2017-18 stood at 5-6pc of GDP or around $17b to account for debt payments and current account deficit.
The revised figure quoted by WB is $1b less compared to what has been forecast by Ministry of Finance for FY 2017-18.
In contravention of international reporting standards, WB calculated Pakistan’s external financing requirement at 9pc by adding the foreign portfolio investment to it, to which the finance ministry had raised a huge hue and cry.
Washington-based lender assured Pakistan of providing assistance in the implementation of economic reforms and mitigate risks that would help the country in achieving its development goals.
Also, WB warned Pakistan was facing challenges in the external sector and an increasing fiscal deficit could jeopardize macro-economic management.
It asked its Pakistani counterparts to ensure that timely policy actions to be taken up for addressing the downward trend on external and fiscal fronts.
Pakistani delegation shared recent data of performance in mobilization of revenues, remittances and exports with WB management.
Several topics came up for discussion during the meeting between WB officials and Pakistani delegation which included human capital development, renewable energy, private sector development, infrastructure financing and macro-economic outlook.
