IMF and Pakistan start negotiations to secure an extra $1 billion for climate action.
Important negotiations about Pakistan’s request for more than $1 billion in additional funding to fight climate change are scheduled to start in Islamabad today with a technical mission from the International Monetary Fund (IMF).
The talks are a component of the Resilience and Sustainability Facility (RSF) agreements of the IMF, which offer long-term funding for climate resilience initiatives.
A more comprehensive policy assessment to evaluate Pakistan’s performance under the ongoing $7 billion Extended Fund Facility (EFF) will take place early next week after the three-week negotiations.
High-level involvement
It is anticipated that the IMF technical team would meet with the Federal Board of Revenue (FBR), disaster management organizations, provincial governments, and important ministries such as Planning, Finance, Climate Change, Petroleum, and Water Resources.
Although he did not elaborate, Mahir Benisi, the IMF’s resident representative in Islamabad, acknowledged that talks are still in progress. To further evaluate Pakistan’s request for RSF assistance and perform the first evaluation of the EFF-supported program, an IMF staff team is planned to travel to Pakistan in mid-March.
In accordance with IMF and World Bank policy recommendations, Pakistani authorities, particularly the Planning and Finance ministries, have developed documentation for the Environment-related Public Investment Management Assessment (C-PIMA), according to official sources.
Pakistan’s development under the EFF
The effectiveness of Pakistan’s 39-month EFF program will also be evaluated. According to sources, the nation has only so far been able to meet one of several structural benchmarks, and other goals are still unmet because of changing macroeconomic conditions both at home and abroad.
By the end of December, the Sovereign Wealth Fund (SWF) must be amended, which is the main benchmark that remains. Authorities assert, however, that other sub-conditions pertaining to governance within this framework have already been satisfied.
Guidelines about the selection criteria for Public Sector Development Programme (PSDP) projects in the next budget have also been released by the Ministry of Planning to all parties involved, including federal ministries and provincial governments.
Pay attention to development initiatives and climate resiliency.
Pakistan intends to give key infrastructure projects, existing projects with over 80% spending, and projects with outside finance support top priority for the upcoming fiscal year. In accordance with the IMF’s guidelines, climate-resilient projects will also receive special attention under the PSDP.
The following are some of the selection criteria for PSDP projects in the next budget:
Core and strategic ongoing initiatives
ongoing initiatives with reasonable completion dates and at least 80% investment
High-impact infrastructure initiatives
Projects that have been authorized following careful review at the Working Party level
Development programs in the 20 districts with the lowest levels of development
The IMF’s advocacy for investments in climate
Pakistan has been advised by the IMF to devote at least 1% of its GDP, or around Rs1.24 trillion a year, to climate adaptation and resilience initiatives. IMF estimates suggest that such investments might help Pakistan maintain growth while lowering inequality and decreasing economic losses brought on by catastrophic weather events like floods.
According to the Fund, making investments in climate-resilient infrastructure might ensure a quicker return to pre-disaster GDP levels by reducing the detrimental effects of natural disasters on economic growth by about one-third.
It also implied that Pakistan’s overall environmental resilience might be improved by coordinating public investments with the CPIMA Action Plan.
In October of last year, Pakistan publicly asked for a $1.2 billion increase in its EFF program. The IMF has emphasized the necessity of structural economic reforms to preserve fiscal sustainability even as it has voiced support for climate financing.
The Fund recognizes that a modest increase in public debt could result from more investment in climate resilience. Nonetheless, it thinks that structural changes and enhanced financial stability would eventually assist Pakistan in preserving its fiscal flexibility.