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Climate-oriented fiscal strategy finalised for IMF
• Ministry says plan will focus on leveraging private sector engagement, international climate finance, carbon markets
• Sustainable Finance Bureau set up to ‘revolutionise climate finance’
• Policy-level talks likely to begin today
ISLAMABAD: In a bid to meet a crucial deadline of the IMF and protect funding from major multilateral agencies, the government has finalised a fiscal strategy envisaging all future investments — including those coming through the newly formed Special Investment Facilitation Council — to be completely climate resilient.
Under the strategy, the public sector development programme (PSDP), public-private partnership (PPP), and the SIFC are required to be reoriented for climate finance, innovative instruments, carbon credits, and accreditation with global fora.
One of the four key objectives of the ongoing $3bn Standby Arrangement (SBA) with the IMF requires Pakistan to build climate resilience given repeated cycles of extreme weather conditions and natural disasters. The adoption of ‘Climate-Public Investment Management Assessment (C-PIMA)’ and PIMA action plan by the federal cabinet is one of the three structural benchmarks to be achieved by the end of this year.
Planning Secretary Awais Manzur Sumra shared the progress made so far with the visiting IMF staff mission on Friday.
Sources told Dawn that policy-level discussion to be led by caretaker Finance Minister Dr Shamshad Akhtar with the IMF mission would begin on Monday (today), after its technical round of talks and interactions with the ministries of finance, planning, energy besides National Electric Power Regulatory Authority, Federal Board of Revenue and the State Bank of Pakistan.
The IMF’s C-PIMA adds a climate-responsive dimension to the PIMA framework and assesses the countries’ capacity to manage climate-related infrastructure. The C-PIMA helps governments identify potential improvements in public investment institutions and processes to build low-carbon and climate-resilient infrastructure.
It involves an assessment of the five institutions of public investment management that are key for climate-aware infrastructure planning, coordination between entities, project appraisal and selection, budgeting and portfolio management and risk management.
The multilaterals, particularly the IMF and the World Bank, have advised the government that international development and climate funding may not flow to Pakistan in future unless national climate investment plans are in line with C-PIMA.
“Keeping in view the challenges of climate change, the Ministry of Planning Development & Special Initiatives unveiled a comprehensive blueprint for tackling climate change while enhancing sustainable development under the National Climate Change Policy (NCCP),” an official statement said on Sunday.
It said the government had made significant progress by unveiling the blueprint of the strategy and establishing the Sustainable Finance Bureau (SFB) “to revolutionise climate finance. The SFB will reorient PSDP towards sustainable finance, with 20 per cent (Rs925 billion) of the new PSDP schemes in FY2023-24 being green.
This initiative is expected to qualify for concessional climate funds, enhancing Pakistan’s capacity to meet its climate targets“, it added.
Under the strategy, the PSDP, PPP, and SIFC portfolios have to be reoriented for climate finance, innovative instruments, carbon credits, and accreditation with global fora.
The government had given a commitment to the IMF in July that it would finalise the UN Framework Convention on Climate Change supported National Adaptation Plan (NAP) by mid-2024 to identify adaptation needs and priorities to boost resilience.
“Until then, we will prioritise ‘no-regret’ measures, including strengthening Public Finance Management to enhance capital expenditure efficiency through a CPIMA supported by IMF’s technical assistance, culminating in cabinet adoption of a related CPIMA and PIMA action plan in summer 2023” under the 2023 structural benchmark.
The government will also prioritise resilient policies, notably social protection, build-back-more-resilient infrastructure destroyed during the recent floods through 4RF framework and executing the updated 2015 National Flood Protection Plan.
National strategy
The planning ministry said the National Climate Finance Strategy aimed at identifying sectoral priorities was a cornerstone in Pakistan’s commitment to the Paris Agreement, focusing on leveraging private sector engagement, international climate finance, and carbon markets.
Pakistan requires $348bn to achieve systemic resilience between 2023 and 2030, as per the World Bank’s 2023 report.
This investment is crucial for climate-proofing Pakistan’s development trajectory and ensuring the well-being of people, the statement said.
This approach aligns with the National Adaptation Plan and Nationally Determined Contributions signifying Pakistan’s dedication to climate-smart policies and practices.
Now all projects to be handled through the PSDP, PPP, or SIFC would have new templates for project concept notes and technical feasibility studies across the planning documents to completion certificates.
Between 2002 and 2020, Pakistan has only “mobilised $2.8bn in adaptation financing, with a disbursement quota of slightly over 60pc compared to over 80pc worldwide,” the IMF said, calling for Pakistan to fully embed climate change in its medium-term inclusive growth and development agenda under the NAP supported by UNFCCC to mobilise climate finance.
Given limited fiscal space, the implied significant additional spending and financing needs will necessitate a mix of domestic policy reforms and higher international support.
“While some part could be met domestically by reprioritising public spending (e.g., removing energy subsidies) and levying taxes (including an adequate level of the PDL and GST on fuel), Pakistan also needs to better tap multi- and bilateral financing sources and catalyse private adaptation investment to complement that of the public sector,” the IMF concluded.
Published in Dawn, November 13th, 2023
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