ISLAMABAD: World Bank (WB) has warned of stopping its advance disbursement all across the credit funded portfolio in Pakistan owing to the chronic issue of delayed refunds.
Sources told Pakistan Today that the international lending institution is not happy with the performance of Pakistan in terms of utilising credit funds, as the funds of a number of projects have been delayed in past two years and subsequently, the WB conveyed this message to the government.
Delayed refunds pertain to unused advances or unused amounts with regards to a particular project, which accrue either because of incompetence of project executor to spend those funds on a timely basis or because of ineligible expenditure.
These refunds are paid back in dollar rate applicable to those grants, but if these refunds get late and currency rate becomes higher, then exchange rate risk accrues which needs to be met while transferring these refunds back. Normally, exchange rate modalities are set at the time of disbursement of loans and are hedged.
The issue of delayed refunds is occurring to education, Social Safety Net, Disaster Resilience Improvement Project, FATA TDAPs Emergency Recovery project, National Immunisation Support Project, skills development, Punjab Health Sector Reforms projects, Balochistan GPE and Enhance Nutrition for Mothers and Children projects.
Documents indicate that a meeting was convened in economic affairs division to discuss the chronic issue of delayed refunds. The participants agreed that delayed refunds primarily occur due to non-availability of exchange risk covers, particularly for projects funded under WB grants, in addition to the settlement of ineligible expenditure classified by Auditor General of Pakistan (AGP) or the WB.
As these refunds have now been outstanding for over two years, the WB has exhausted its waiver option. A policy will be formally conveyed to the WB by the government assuring that such lapses will not occur in future.
The documents further added that if this situation persists then the WB will stop the advance method all across its credit funded portfolio in Pakistan.
The meeting, realising the gravity of the situation, agreed to settle the observations through the internal meeting and issue audit certification covering all expenses. Moreover, strict adherence will be prescribed to not have expenditure classified as ineligible.
Separate head of accounts may be created in which adequate expected exchange risk rupee cover will be made available through budgetary provision twelve months prior to the closure of the project.
For refund of unspent balances, ineligible expenditure and exchange risk cover, similar methodology may be adopted as is available for loan proceeds. This may imply at source deductions between the government entities.
This would ensure timely settlement with the WB.
According to reports, a sub-group was constituted comprising participants from Finance Ministry, AGP, Controller General of Account (CGA) and EAD to jointly propose a policy framework for consideration by their respective organisations.
Senior official of EAD said that the delayed refunds issue arises due to laziness of project implementers as they could not solve the financial issues within the period of six months.
This site is absolutely fabulous!
Keep up the great work guyz.