Pakistan: AnAn EvaluationEvaluation ofof thethe WorldWorld Bank’sBank’s AssistanceAssistance The World Bank Group WORKING FOR A WORLD FREE OF POVERTY The World Bank Group consists of five institutions—the International Bank for Reconstruc- tion and Development (IBRD), the International Finance Corporation (IFC), the International Development Association (IDA), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID). Its mission is to fight poverty for lasting results and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity, and forging partnerships in the public and private sectors. The Independent Evaluation Group ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION The Independent Evaluation Group (IEG) is an independent, three-part unit within the World Bank Group. IEG-World Bank is charged with evaluating the activities of the IBRD (The World Bank) and IDA, IEG-IFC focuses on assessment of IFC’s work toward private sector development, and IEG-MIGA evaluates the contributions of MIGA guarantee projects and services. IEG reports directly to the Bank’s Board of Directors through the Director-General, Evaluation. The goals of evaluation are to learn from experience, to provide an objective basis for assess- ing the results of the Bank Group’s work, and to provide accountability in the achievement of its objectives. It also improves Bank Group work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. Pakistan: An Evaluation of the World Bank’s Assistance 2006 The World Bank http://www.worldbank.org/ieg Washington, D.C. © 2006 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1234509080706 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomina- tions, and other information shown on any map in this work do not imply any judgement on the part of The World Bank con- cerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encour- ages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. Photo: Islamabad, Pakistan, Rawal Dam and Lake. © Neil McAllister/Alamy, courtesy of Alamy. ISBN-10: 0-8213-6668-8 ISBN-13: 978-0-8213-6668-4 e-ISBN: 0-8213-6669-6 DOI: 10.1596/978-0-8213-6668-4 Library of Congress Cataloging-in-Publication Data has been applied for. World Bank InfoShop Independent Evaluation Group E-mail: [email protected] Knowledge Programs and Evaluation Capacity Telephone: 202-458-5454 Development (IEGKE) Facsimile: 202-522-1500 E-mail: [email protected] Telephone: 202-458-4497 Facsimile: 202-522-3125 Printed on Recycled Paper Contents v Acknowledgments vii Preface ix Foreword xiii Executive Summary xvii Acronyms and Abbreviations 1 1. Introduction and Country Background 2 Historical and Political Context 3 The Situation in the Early 1990s 5 2. The Bank’s Program 5 The Bank’s Strategy 7 Portfolio Management 8 Analytical and Advisory Activities 9 Bank Partnerships 11 3. Macroeconomic Stabilization 11 The Bank’s Strategy 12 Macroeconomic Outcomes 12 Assessing the Bank’s Contribution 15 4. Poverty Reduction and Social Sector Development 15 The Bank’s Strategy 16 Poverty Reduction and Social Sector Outcomes 18 Assessing the Bank’s Contribution 19 Lessons and Recommendations 21 5. Sustainable Growth 21 The Bank’s Strategy 22 Energy and Infrastructure 26 Finance 29 Agriculture and Natural Resource Management 31 Trade, Privatization, and Investment 32 Summary iii PAKISTAN: AN EVALUATION OF THE WORLD BANK’S ASSISTANCE 33 6. Governance 33 The Bank’s Strategy and Program 34 Governance Outcomes 35 Assessing the Bank’s Contribution 36 Lessons and Recommendations 37 7. Conclusions, Lessons, and Recommendations 37 Overall Assessment 38 Lessons 40 Recommendations 41 Annexes 43 A: Structural Adjustment Loans and Credits 47 B: Statistical Tables 69 C: List of People Met 77 D: Guide to IEG’s Country Evaluation Rating Methodology 81 E: Management Action Record 83 F: Comments from the Pakistani Government 91 G: IEG Response 93 H: Pakistan CAE Ratings, FY94–03 95 I: Chairman’s Summary: Committee on Development Effectiveness (CODE) Boxes 2 1.1: Rebasing of National Accounts Statistics 23 5.1: Issues in the Independent Private Power Program Figures 27 5.1: M2 and Credit in Pakistan (% of GDP) 32 5.2: Pakistan: Gross Fixed Capital Formation (% of GDP) 1993/94–2003/04 Tables 6 2.1: World Bank Lending to Pakistan (Sector Allocation) 7 2.2: IBRD/IDA Commitments FY94–03 8 2.3: IEG Project Evaluation Ratings Approved FY94–03 8 2.4: Annual Budget Allocations (% of Total) 12 3.1: Structural Adjustment Operations in Pakistan FY94–03 13 3.2: Selected Macroeconomic Indicators 13 3.3: Remittances (US$ millions) 16 4.1: Social Sector Projects, FY94–03 17 4.2: Selected Social Indicators, 1993–2002 18 4.3: Government Allocations and Expenditures on SAP 22 5.1: Infrastructure Operations FY94–03 26 5.2: Financial Sector Operations in Pakistan FY94–03 28 5.3: Selected Banking Sector Statistics 29 5.4: Agriculture and Natural Resource Management Operations in Pakistan FY94–03 34 6.1: WBI Governance Indicators Percentile Rank: Control of Corruption 99 Endnotes 103 Bibliography iv Acknowledgments This evaluation was prepared by Lily Chu (Inde- (Middle East and North Africa Social and Eco- pendent Evaluation Group, Country Evaluation nomic Development Group), and Rene Vanden- and Regional Relations), the Task Manager. Back- dries (Independent Evaluation Group, Country ground papers, as inputs to the Country Assistance Evaluation and Regional Relations). Brenda Evaluation, were prepared by James Brown, Geof- Manuel (consultant) provided input on portfolio frey Fox, Manuel Hinds, Adil Kanaan, and Richard management and data analysis. Gulmira Kara- D. Stern (consultants), and the Center for Global guishiyeva (consultant) provided research and Development (Nancy Birdsall, Adeel Malik, and data support. Roziah Baba provided administra- Milan Vishnav). Peer reviewers were Professor tive support. Ayesha Jalal (Tufts University), Mustapha Nabli Director-General, Evaluation: Vinod Thomas Director, Independent Evaluation Group, World Bank: Ajay Chhibber Senior Manager, Country Evaluation and Regional Relations: R. Kyle Peters Task Manager: Lily L. Chu v Preface his report examines World Bank assistance to Pakistan during the pe- riod 1994–2003. It analyzes the objectives and content of the Bank’s Tassistance program during this period, the outcomes in terms of eco- nomic and social development in Pakistan, and the contributions of the Bank and other development partners to development outcomes. The report is based on a review of project files, eco- of other development partners, the private sector, nomic and sector reports, implementation com- academia, nongovernmental organizations, and pletion reports, Project Performance Assessment staff of the World Bank field office. A list of these Reports and other Independent Evaluation Group individuals is provided in Annex C. Their cooper- (IEG) evaluations, Quality Assurance Group ratings ation and assistance is gratefully acknowledged. of quality at entry for Pakistan projects and eco- Comments from the Bank’s regional manage- nomic and sector reports, and interviews with ment have been incorporated in the report. The Bank staff. This Country Assistance Evaluation report was also sent to the Pakistani authorities, (CAE) also incorporates work on background pa- whose comments are reflected in the report and pers in macroeconomic management, financial attached in Annex F. IEG’s response to the gov- sector, rural and environment, infrastructure, and ernment’s comments is attached as Annex G. A dis- poverty and social sectors. The CAE team visited cussion of the CODE Subcommittee was held on Pakistan in December 2003 and April 2004 for dis- November 28, 2005, and a summary of this dis- cussions with Pakistani officials, representatives cussion is attached as Annex I. vii Foreword fter outpacing its South Asian neighbors in gross domestic product (GDP) growth over the first four decades of its existence, Pakistan A in the 1990s began