ISLAMABAD: The World Bank is set to approve $600 million in financing for the first phase of Pakistan’s “Public Resources for Inclusive Development” under its Multiphase Programmatic Approach (MPA). This initiative aims to enhance both the quantity and quality of public spending on inclusive development at the federal level.
According to official documents, the full federal programme is valued at $1.62 billion over five years. It aligns with fiscal and primary balance targets outlined in Pakistan’s agreement with the International Monetary Fund (IMF) under the Extended Fund Facility (EFF), as well as the government’s Medium-Term Fiscal Framework (MTFF).
The World Bank’s $600 million contribution will target key budget heads central to the programme’s objectives and Disbursement-Linked Indicators (DLIs). The baseline is based on Pakistan’s enacted FY25 budget, allowing for detailed tracking of budget formulation, execution, and reporting, in line with economic and functional classifications.
Activities crucial to programme outcomes but not included in the existing budget will be financed separately. These include technical consulting services, institutional assessments, and operational costs such as salaries, training, supervision, and monitoring.
The MPA is closely aligned with the government’s ongoing fiscal reform drive, anchored in the National Fiscal Pact — an intergovernmental agreement focused on more balanced and efficient resource use. Pakistan’s persistent fiscal deficits have long been a source of macroeconomic instability and an obstacle to sustained growth. The MPA seeks to tackle these challenges by expanding the tax base, improving spending transparency, and ensuring more efficient use of public resources in sectors like education and health.
Additionally, the programme will bolster Pakistan’s data ecosystem to enable better tracking of social and economic outcomes. The MPA is a key pillar in the government’s broader five-year economic reform roadmap — the National Economic Transformation Plan, also known as “Uraan Pakistan.”
In Phase 1 of the programme, the World Bank funding will support reforms at the federal level under the National Fiscal Pact. One major reform under Results Area 1 includes the creation of a dedicated tax policy unit within the Finance Division, which will facilitate the development of a medium-term tax policy framework, reduce tax expenditures, enhance policy predictability, expand the taxpayer base, and boost revenues.
Results Area 2 focuses on improving public spending efficiency and aligning it with policy priorities. This will involve reforms in administrative structures, reviews of pensions and subsidies, enhanced transparency in budget documentation, and the rollout of digital payment and financial management systems.
