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World Bank official recommends high power tariff - Printable Version

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World Bank official recommends high power tariff - Naveed Yaseen - 05-20-2009 06:28 AM

By Mehtab Haider
ISLAMABAD: Upward tariff adjustments for power is imperative for eliminating subsidy and bringing efficiency as without improving balance sheets power generation cannot be maximised, World Bank’s Country Director for Pakistan Yusupha B Crookes said on Tuesday.

Talking to reporters after launching a World Bank report titled ‘Access to Finance’, he commended the democratic government’s bold steps for increasing the electricity tariff, saying other South Asian countries were amazed to see the progress made by Islamabad in terms of eliminating power subsidy. Without discussing the growth figure fudging issue, in reply to a query, he said that the World Bank was ready to extend its technical and financial assistance in order to restructure the statistics agency, the Federal Bureau of Statistics.

“Without giving autonomy to DISCOs, their unbundling will not help in achieving desired results,” he said and added that the bank was working with the government for preparing an action plan to bring improvement in the power sector.

To another query regarding possible level of financial assistance from the WB, he said that the bank would provide $1.9 billion for Pakistan before June 30, out of which $500 million was disbursed on April 26 under the Poverty Reduction and Economic Stabilisation Operation (PRESO). The Executive Boards of the WB is expected to meet on June 4 in which some more projects will be approved. Sharing details of the upcoming projects before the next executive board meeting, he said that the WB would consider approval of $200 million for establishing social safety nets and $100 million for Higher Education Commission (HEC).

All the relevant documents have been completed for these two projects, he added. He said the WB would also grant its approval for Sindh and Punjab’s education sector reforms in the range of $300 million and $350 million respectively during the ongoing fiscal year.

However, during the day long launching workshop on access to finance, the CEO, National Rural Support Program (NRSP), Rashid Bajwa, revealed that the micro finance institutions were charging an exorbitant interest rate of 33 per cent from small borrowers. He said that the financing provision to micro finance institution was provided at 16 to 17 per cent rates on KIBOR plus 200 basis points and after including the expenses, the interest rates went up to 33 per cent for small borrowers.

He said when the government could provide subsidized financing to exporters it should devise a strategy to protect small borrowers from such kind of higher interest rates. The liquidity crunch is damaging the micro finance sector and they have already lost over 200,000 active clients. Despite significant growth of Pakistan’s financial system, access to finance remains elusive for most Pakistanis, especially among poor people, women, and small businesses in rural areas, says the WB report.

The report, titled “Bringing Finance to Pakistan’s Poor: A Study on Access to Finance for the Underserved and Small Enterprises,” said the average Pakistani household remains outside the formal financial system, saving at home and borrowing from family or friends in cases of dire need. In fact, only 14 per cent of adults have access to a formal financial institution and about 40 per cent have no financial access to formal or informal financial systems.

Policy efforts to increase access to finance in Pakistan have taken time to bear fruit, the report said, but now access is expanding quickly in certain financial sectors such as microfinance and remittances æ albeit from a very low base. The report says the major constraints to financial access arise from high levels of poverty, combined with low awareness of and information about available financial services, as well as gender bias.

http://www.thenews.com.pk/daily_detail.asp?id=178446