WASHINGTON/ISLAMABAD, June 2: The World Bank and its commercial arm, the International Finance Corporation (IFC), have approved a $6.5-billion loan for Pakistan under a new four-year assistance programme but raised doubts about continuation of the country’s growth momentum and living conditions of the people.

The package, announced in Washington on Thursday includes $1bn for reconstruction in the areas hit by last October’s earthquake which killed more than 73,000 people and left 3.3 million others homeless.

The World Bank’s executive board of directors voted in favour of the loan, which was a significantly greater sum than the $1.5 billion Pakistan received last year. It is also more than double the $2.73 billion Pakistan received from the bank between 2002 and 2005.

The $6.5 billion loan, part of the bank’s country assistance strategy for Pakistan, covers loans for the current fiscal year through 2009, said the World Bank.

The World Bank noted improvements made in Pakistan’s economic sector, citing government initiatives that promoted reform and economic growth in the past six years. Pakistan’s economy grew by 3.3 per cent on average between 1997 and 2002 and in 2004-2005 it expanded 8.4 per cent. “Pakistan’s recent growth performance is encouraging, but its continuation is by no means assured,” said Praful Patel, the World Bank’s vice president for South Asia. With a population of over 150 million people, Mr Patel said, Pakistan needs a healthier investment climate and improved quality of life for its citizens, particularly women.

The World Bank noted in previous country reports that Pakistan’s external and public debt are both “quite large,” raising concerns over future growth prospects in the country.

An announcement made in Washington said that a “considerable” portion of the loan will be spent on transport and energy and on key areas in sustaining growth and tackling poverty.

The bank has called for improving the investment climate and the quality of life of the people. Sustained growth will require continued sound macroeconomic management along with further improvements in the investment climate and faster progress in improving the quality of life for all Pakistani citizens, especially women, he said.

It said Pakistan’s infrastructure needed significant investment in order to support the country’s growth and service delivery goals. Infrastructure services, including electricity, paved roads, municipal services and telecommunication reach a relatively low proportion of the population.

“Moreover, inefficient operations in key sectors, like power and transport, adversely affect competitiveness,” he said.

For the poor to participate and benefit from growth, the country needs to accelerate human development.

The bank said that progress was being made but pointed out that “analysis suggests that it will be difficult to achieve the millennium development goals for infant mortality, child malnutrition, primary education completion, and elimination of the gender gap in primary school enrolment”.

The joint Bank/IFC CAS, which details the bank’s strategic approach to helping Pakistan achieve its development goals, places immediate priority on addressing the impact of the October 2005 earthquake. Up to $1 billion will be used to support reconstruction and recovery, of which $840 million has already been approved.

In addition, based on the government’s priorities for sustaining growth and poverty reduction, the increase in lending will be primarily in infrastructure mainly energy, water, and transport and human development.

“This strategy is designed to help Pakistan prosper,” said John Wall, the World Bank’s country director. “We will substantially ramp up support to Pakistan and focus on the areas that are most critical for the country’s poor and most vulnerable.”

The IFC strategy in Pakistan seeks to increase investments with a target range of $500-600 million during the fiscal year 2006-09 period. IFC activity will focus on three main sectors: financial, small and medium enterprise and infrastructure.

Around half of the lending will be channelled to the provinces (mainly the NWFP and Punjab). The country assistance strategy was prepared in consultation with various government authorities in Pakistan and the private sector.

This includes four $340 million new projects for provinces, including the NWFP first development policy credit, Punjab education development policy credit, Punjab-irrigation sector development policy loan and the Punjab municipal services improvement loan.

The NWFP first development policy credit of $90 million will support the implementation of the provincial government’s medium-term reform programme to introduce fiscal, governance, civil service, devolution and procurement reforms.

The $100 million Punjab education development policy credit aims at educational reforms. Another $100 million Punjab-irrigation sector development policy loan will provide financing to a major provincial reform agenda to improve fiscal management and service delivery.

Similarly, the $50 million Punjab municipal services improvement project is designed to improve the viability and effectiveness of urban services provided by the participating tehsil municipal authorities and to make these improvements sustainable and replicable in other municipalities.