Pakistan Pushes for Full $1.7 Billion World Bank Financing Despite Reform Slippage

Pakistan is moving ahead with plans to secure the full $1.7 billion World Bank financing package designed to widen the tax base, curb government spending and align public expenditure with constitutional responsibilities, despite slow progress in the programme's opening phase and repeated departures from key reform commitments.

The government has already breached one of the programme's conditions twice by raising taxes on imports, first in June and again last month when the Economic Coordination Committee approved additional customs duties to shield a domestic tyre manufacturer. The step runs contrary to the National Tariff Policy, which Pakistan is required to implement under the loan agreement.

The financing sits under the Public Resource for Inclusive Development programme, structured through the World Bank's Multiphase Programmatic Approach. It will be rolled out in four overlapping phases, beginning with $700 million approved last year. Federal and all four provincial governments are expected to benefit.

Officials say there are no plans to abandon the programme. The World Bank rated implementation of the federal government's $600 million operation as moderately satisfactory in its two most recent assessments. After the operation became effective on May 14, 2026, the federal government received an advance disbursement of $164.5 million on June 29, 2026. The next $200 million tranche is being readied for the Khyber-Pakhtunkhwa government, with later phases expected to extend financing to Balochistan and Punjab.

Under the federal operation, Pakistan committed to implementing the National Fiscal Pact, which aims to end federal financing of projects and responsibilities that constitutionally belong to the provinces. Yet in June 2026 the government approved Rs 87 billion for a project in Sindh, raising fresh questions about compliance. Sindh separately secured $100 million in the first phase to demonstrate provincial reforms, particularly in agricultural and property taxation.

The World Bank's wider reform agenda seeks to rebalance federal and provincial finances by cutting federal spending on subjects transferred under the 18th Amendment and strengthening provincial revenue collection. The lender has flagged trade liberalisation, a new National Finance Commission Award, power sector restructuring, greater private participation in state-owned enterprises and improved social service delivery as essential to accelerating growth, creating jobs and reversing rising poverty. The programme has three central aims: raising tax revenues, improving the efficiency and prioritisation of public spending, and strengthening the data systems used for fiscal management and service delivery.