Project set for closure in FY25: World Bank disburses 80pc of $400m PRR loan

ISLAMABAD: The World Bank-funded Pakistan Raises Revenue (PRR) loan, amounts to $400 million, out of which 80 percent has been disbursed and the project is due to close in FY 2025.

Policy Research Institute of Market Economy (PRIME) has released its latest report titled, “World Bank’s PRR Loan: Did It Help Increase Tax Revenue and Tax Machinery’s Efficiency? A Prospective Analysis” here on Friday.

The original development objective of the loan was approved on June 12, 2019, which stated that the loan was to “contribute to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance.”

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While the World Bank’s analysis details the various aspects of the loans and the progress made upon the agreed-upon actions in the loan, the report by Shahid Mehmood, Research Fellow at PRIME, assesses the loan’s performance to bring a neutral view of the developments so far, given the fact that the information provided may not be an exact reflection of the on-ground realities.

The report by Shahid Mehmood points to two major components of the PRR loan: a ‘results-based component’ and the ‘traditional Investment Project Financing (IPF) component.’ The results-based component deals with maximising revenue through four objectives: i) a simple and transparent tax system, ii) control of taxpayer obligations, iii) compliance facilitation, and iv) institutional development.

The report said it can be easily gauged that till now, not only has the main objective not been achieved but the four main objectives of the first component also remained unfulfilled. With 80 percent of the loan already utilized, it is highly improbable that there can be any major improvements with the remaining utilization of loans.

FBRs inner workings remain the same (which reflect failure to develop institution and its capacity), Tax-to-GDP ratio has hardly budged, the number of filers has gone down, efforts tobring in retailers and other non-compliant groups into the tax net have failed or have had negligible success, etc.

All in all, up till now, PRR loan has failed to ameliorate the issues plaguing Pakistan’s tax system and tax machinery for long, report added.

The jury is still out on PRR, as the loan is still to be completely utilized, but there are worrisome indications that this loan may also go the way of the earlier TARP (with perhaps minor improvements).

There seems to be many reasons to believe so, partly reflected in the information gathered during the impartial appraisal of this loan, and also in light of information coming out of the interviews conducted with FBR and WB officials.

It occurs that both the creditors and the institution taking the loan (FBR as well as federal Government of Pakistan) refused to learn anything from the past episodes of failure, As well as taking ground realities into consideration, report added.

Dr Tobias Akhtar Haque, Lead Country Economist for Pakistan at World Bank, pointed that “no one project is ever going to solve the public finance issues of a country of 240 billion people facing bother external and internal challenges.”

Copyright Business Recorder, 2024