IDA considers $50 mn loan for social protection project

Faisalabad: The International Development Association (IDA) is considering a loan proposal to provide $50 million to Pakistan for social protection project.

According to World Bank (WB), project study reports stated that the broad objectives of the National Social Protection Strategy were to reduce poverty and inequality, and promote human capital investments among poor families through provision of direct monetary transfers and incentives for investing in human capital. The World Bank assistance under the proposed project would aim to contribute to these ultimate objectives of poverty reduction and human capital development among poor families.

Within this broader context, the objective of the proposed project is to strengthen the ability of the Food Support Program (FSP) and Child Support Program (CSP) to play an effective role in the country's strategy to reduce poverty and inequality and to foster investments in human capital, as well as to assist the Pakistan Government in the development of a minimum package of social care services for the poor structured around these programs.

Specifically, phase-1 of the project would support the effective strengthening and implementation of the FSP and CSP programs and of a minimum package of social care services. 'Effectiveness' would be assessed in terms of (i) the targeting, coverage, and adequacy of the benefits/services; (ii) efficacy of the CSP conditionalities (co-responsibilities) to foster investment by beneficiary families in human capital; and (iii) the capacities of involved institutions (including ministries, program staff, service providers, and beneficiary groups) to manage these programs efficiently, to monitor results, and to (begin to) evaluate impacts.

Phase-2 of the project would consolidate and deepen the reforms, further perfecting the design of the programs based on experience under phase-1. Such 'second-generation reforms' might include measures to enable scaling up/down depending on country conditions, further strengthening of M&E, additional administrative efficiency gains, possible development of complementary social protection instruments/services for poor people who are highly vulnerable but do not have children (and thus are not eligible for the co-responsibility requirements of the CSP); and development of mechanisms to enhance prospects for self-sufficiency ('graduation') of poor families.

Meanwhile, World Bank experts have emphasised the need for improving Fiscal Sustainability and Financial Management in Pakistan. The fiscal sustainability of civil service schemes can be improved through parametric changes in the system--changes in the assessment base, accrual rates and retirement age. This will lower short term and the present value of future pension spending. Systemic changes in the system--shifting to defined contribution system--would take up front fiscal outlays, but would eventually lead to a much more sustainable civil service pension system, lowering the present value of fiscal expenditures on pensions, from 71 to 47 percent of GDP.

Options for improving the fiscal sustainability of EOBI will also need to be considered, including improvements in the financial management of reserves. Information on the management of other funds also needs to be improved, including strengthening independent oversight. Investment policy statements and processes will need to be defined and disclosure improved.

According to WB report, Monitoring Systems will need to be strengthened to avoid evasion, thus improving the financial position of funded schemes. Improvements in tracking of individual earnings for the pension department to make accurate payments will be needed for parametric reforms in the civil service scheme. For a defined contribution (DC) scheme, record keeping would have to be much more stringent. Improving enforcement mechanisms for late payments and reporting is needed. In all schemes, monitoring is weak and will need to