Public Disclosure Authorized - World Bank...2010/09/27 · 2 CURRENCY EQUIVALENTS (Exchange Rate...

Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 56653-PK

PROJECT PAPER

ON A

PROPOSED ADDITIONAL CREDIT AND RESTRUCTURING

IN THE AMOUNT OF SDR 198.9 MILLION (US$300 MILLION EQUIVALENT)

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR THE

EARTHQUAKE EMERGENCY RECOVERY CREDIT

September 22, 2010

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective August 31, 2010)

Currency Unit = Pakistan Rupee Pakistan Rupees 85.64 = US$1

SDR 0.6627 = US$1

FISCAL YEAR

July1-June 30, 2010

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank GDP Gross Domestic Product AJK Azad Jammu and Kashmir IBRD International Bank for

Reconstruction and Development CAS Country Assistance Strategy IDA International Development

Association CPS Country Partnership Strategy IFAD International Fund for Agricultural

Development CoA Chart of Accounts KP Khyber Pakhtunkhwa Cusecs Cubic feet per second NDMA National Disaster Management

Authority DfID Department for International Development PARCO Pak-Arab Refinery, Limited DNA Damages and Needs Assessment PDO Project Development Objective ERC Emergency Recovery Credit PEFA Public Expenditure and Financial

Accountability ERRA Earthquake Recovery and Reconstruction

Authority PSO Pakistan State Oil

FATA Federally Administered Tribal Area PIFRA Project to Improve Financial Reporting and Auditing

GB Gilgit-Baltistan SBP State Bank of Pakistan GoP Government of Pakistan SDR Special Drawing Rights

Vice President: Isabel M. Guerrero Country Director: Rachid Benmessaoud Sector Director: Ernesto May Sector Manager: Miria Pigato Co-Task Team Leaders: Hanid Mukhtar & Christian Eigen-Zucchi

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PAKISTAN: EMERGENCY EARTHQUAKE RECOVERY CREDIT

PROJECT PAPER FOR ADDITIONAL FINANCING AND RESTRUCTURING

(TO SUPPORT FLOOD RECOVERY)

CONTENTS

I. Additional Financing Data Sheet .........................................................................................4 II. Introduction ..........................................................................................................................6 III. Background ..........................................................................................................................6 IV. Rationale for Additional Financing and Restructuring ......................................................10 V. Proposed Changes ..............................................................................................................11 VI. Fiduciary Aspects and Safeguards .....................................................................................13 VII. Appraisal Summary ...........................................................................................................17

ANNEXES

Annex 1: Results Framework and Monitoring Indicators ...................................................... 18

Annex 2: Operational Risk Assessment Framework (ORAF) ................................................ 22

Annex 3: Summary of Relief Items Provided as of September 16, 2010 ............................... 26

Annex 4: Key Macroeconomic Indicators .............................................................................. 27

Annex 5: Positive List of Permissible Imports ....................................................................... 28

Annex 6: PSO Fuel Imports, Sales and Stocks ....................................................................... 29

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PAKISTAN: EARTHQUAKE EMERGENCY RECOVERY CREDIT

I. ADDITIONAL FINANCING DATA SHEET

Basic Information - Additional Financing (AF) Country Director: Rachid Benmessaoud Sector Director: Ernesto May Team Leader: Hanid Mukhtar & Christian Eigen-Zucchi Project ID: P099110

Sectors: Economic policy Themes: Natural disaster management (100%) Environmental category: B

Expected Effectiveness Date: October 1, 2010 Expected Closing Date: May 31, 2011 Lending Instrument: Emergency Recovery Credit Additional Financing Type: Credit

Basic Information - Original Project Project ID: P099110 Environmental category: B Project Name: Earthquake Emergency Recovery Credit

Expected Closing Date: May 31, 2011

Lending Instrument: Emergency Recovery Credit AF Project Financing Data

[ ] Loan [ X ] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: Standard IDA terms, with a maturity of 35 years, including a grace period 10 years.

AF Financing Plan (US$m) Source Total Amount (US $m)

Total Project Cost: Cofinancing: Borrower: Total Bank Financing: IBRD IDA New

Recommitted

Original 400

400

Additional 300

300 300

Total 700

700 300

Recipient: Government of Pakistan, Economic Affairs Division Responsible Agency: Planning & Development Division Contact Person: Ashraf M. Hayat, Secretary, Planning & Development Division Telephone No.: 051-921-2831, 051-920-6444 Fax No.: 051-920-2704 Email: [email protected]

AF Estimated Disbursements (Bank FY/US$m) FY 2010/11 2011/12 Annual 300 Cumulative 300 Does the project require any exceptions from Bank policies? Have these been approved by Bank management?

[ ]Yes [X] No [ ]Yes [ ] No

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Does the project include any critical risks rated “substantial” or “high”?

[ ]Yes [X] No

Original project development objective:

To support the efforts of the Government of Pakistan to: (i) Reduce the immediate suffering resulting from the effects of the earthquake and restore livelihoods destroyed by the earthquake; (ii) Restore basic services to the affected population and rebuild public infrastructure; and, (iii) Start the recovery and reconstruction process. Revised project development objective:

To support the efforts of the Government of Pakistan to: (i) Reduce the immediate suffering resulting from the effects of the 2005 earthquake, and restore livelihoods destroyed by the 2005 earthquake; (ii) Restore basic services to the affected population and rebuild public infrastructure destroyed by the 2005 earthquake; (iii) Start the recovery and reconstruction process from the 2005 earthquake; and (iv) Enhance the resources available to adequately meet the early recovery needs of people affected by the 2010 floods .

Project Description

The proposed Additional Financing and Restructuring will help the Government of Pakistan meet the cost of increased imports (from a specified positive list) needed sustain the recovery process from the 2010 floods.

Safeguard policies triggered? Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)

X Yes ○ No ○ Yes X No ○ Yes X No ○ Yes X No ○ Yes X No ○ Yes X No ○ Yes X No ○ Yes X No ○ Yes X No ○ Yes X No

Conditions and Legal Covenants Financing Agreement Reference Description of

Condition/Covenant Date Due

Section V.1, Schedule 2 (Additional Withdrawal Undertakings).

Pakistan undertakes not to use the critical goods (fuel) financed under this operation for any military or paramilitary purposes.

N/A

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II. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to restructure and provide an additional credit in an amount of US$300 million (SDR 198.9 million) to the Islamic Republic of Pakistan: Earthquake Emergency Recovery Credit (ERC), P099110, Credit 4134-PAK.1 2. The proposed Additional Financing and Restructuring would support the Government of Pakistan’s efforts to respond to the loss of life and destruction wrought by the recent floods, helping to finance some of the critical imports necessitated by the disaster. The proposed Credit is part of the first phase of the World Bank’s strategy to assist in the floods recovery in Pakistan, helping to ensure the availability of adequate fuel supplies essential for relieving suffering and beginning the restoration of the productive capacity of the economy. The financing will cover expenditures incurred by the Government of Pakistan (GoP) on motor gasoline, jet fuel, and diesel imports needed for recovery efforts (as specified on a positive list in Annex 5), which will be determined on the basis of import Bills of Lading.2

3. The proposed operation would also entail restructuring the Earthquake ERC to: (i) extend the scope of the project to cover all flood affected areas, (ii) revise the Project Development Objective (PDO) and the description of Component 3 (import financing) of the project to reflect this extension in the scope of the project; and (iii) change the implementing agency for Component 3 of the project from the Earthquake Reconstruction & Rehabilitation Authority (ERRA) to the Planning & Development Division, Government of Pakistan. III. BACKGROUND Emergency Context

4. Beginning July 22, 2010, Pakistan experienced extraordinarily heavy monsoon rainfall – nearly 30 percent above average – in the northern part of the country. Upstream, the high flow of water caused extensive damage to settlements, farm lands and infrastructure, while downstream, the Indus River and its tributaries burst its banks with flash floods inundating broad areas and submerging entire villages and towns. Continued heavy rains hampered rescue efforts while the surge of water, bolstered by runoff from further rains, proceeded to inundate many populated areas of Khyber Pakhtunkhwa (KP) and Balochistan Provinces. By mid-August, flood waters had reached Punjab, filling the reservoirs on river basins draining Southern Pakistan, before proceeding to trigger extensive flooding in Sindh. For example, the flow through the Sukkur Barrage (Sindh) reached 1.4 million cubic feet per second (cusecs), though the barrage was designed to withstand a maximum of 0.9 million cusecs.

1 This Project Paper was prepared by a team led by Hanid Mukhtar and Christian Eigen-Zucchi (SASEP), and included Asif Ali (SARPS), Augustine Pierre Maria (SASDU), Javaid Afzal (SASDI), Martin Serrano (LEGES), Rakhi Bhavnani (SASDU), Saeeda Sabah Rashid (SASFM), Shabnam Naz (SASEP), Shafqat Manzoor Mirza (SASGP), Nimanthi Attapattu (SASEP), Shaheen Malik (SASEP), Shideh Hadian (SASDU), Tahira Syed (SASDA). The team benefited from the advice and support of Chau-Ching Shen (CTRFC), Hadi AbuShakra (LEGES), Jennifer Thomson (SARFM), William Kingdom (SASDU). 2 Storage, handling, transportation and use of fuel would require implementation of the "Standard Operating Procedures" prepared by the GoP itself and emergency procedures in place to respond to any eventuality. Since the environmental category of the original Earthquake ERC is B, the environmental category of the additional financing, which uses the import financing component of the original project, will remain the same. Import financing does not involve or support any specific construction activities, so no new EMP/EA (part of the Bank's environmental safeguards requirements) is envisaged.

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5. The floods and ensuing landslides have affected all four provinces, as well as the Federally Administered Tribal Areas (FATA), the State of Azad Jammu and Kashmir (AJK), and Gilgit-Baltistan (GB).3 As of August 31, river levels were still high and rainfall patterns have not returned to their normal states, with the consequence that several new villages are being flooded as barrages and other flood control structures yield to the sustained water pressure. It is likely to be some time before the waters recede fully. On August 11, 2010, the GoP requested the World Bank and the Asian Development Bank (ADB) to undertake a Damages and Needs Assessment (DNA) in the flood-hit areas, and the One UN to undertake an Early Recovery Needs Assessment. In partnership with development partners and other stakeholders, the DNA was launched on August 16, 2010 and is expected to be complete by October 15, 2010. 6. The devastation of the floods is national in scope. Preliminary estimates compiled by the National Disaster Management Authority (NDMA) of the GoP indicate that 1,781 people have died and 2,966 were injured as a direct result of the floods, with figures expected to rise due to secondary effects, such as water borne diseases (Table 1). About 1.9 million homes have been damaged or destroyed, displacing more than 7.5 million people, many of whom are now in congested camps finding it difficult to meet basic needs like food, clean water, shelter, sanitation and medicine. Satellite imaging suggests that about 2 million hectares of agricultural lands have been inundated, destroying or damaging standing crops, causing major soil erosion in some areas, and potentially hampering the imminent new sowing season if waters do not recede quickly.4 The transportation system has been disrupted by broken roads, bridges and railways at various points, leaving many communities cut-off from public services and relief efforts, as well as the income earning opportunities of the market nexus. Key structures, such as schools, clinics, and municipal buildings have also sustained damage or been emptied of their contents. Electricity and telecommunications networks have been affected, and water and sanitation systems have been rendered inoperable. Other essential infrastructure has also sustained damage. For instance, the Pak-Arab Refinery Limited (PARCO) mid-country refinery, which supplies 20 percent of the country’s fuel consumption, was closed on August 7, 2010 due to the floods. With access roads and bridges to the refinery badly damaged, resumption of refinery activity is not expected before second-half of September 2010, necessitating elevated imports of refined products. It should be emphasized that the floods adversely impacted communities that were already vulnerable, with low coping capacity and limited human and economic development.

Table 1. Estimated Flood Damages as of September 16, 2010 Balochistan KPK

(incl. FATA) Punjab Sindh AJ&K GB Total

Deaths 48 1,156 110 213 71 183 1,781Injured 98 1,198 350 1,173 87 60 2,966Houses Damaged 75,261 200,799 509,814 1,098,720 7,106 2,830 1,894,530Source: National Disaster Management Authority, Government of Pakistan.

3 Azad Jammu and Kashmir and Gilgit-Baltistan are the Pakistan-administered portion of an area over which India and Pakistan have been in dispute since 1947. In providing this financing, the International Development Association (IDA) does not intend to make any judgment as to the legal or other status of any disputed territories or to prejudice the final determination of the parties' claims. 4 Some positive effects on agricultural productivity are expected over the medium term, as new sediment may raise soil fertility.

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Overall Economic Impact

7. The floods are expected to have a substantial impact on the pace of real Gross Domestic Product (GDP) growth, the rate of inflation, the size of the fiscal deficit, and the balance of payments (Annex 4 presents key macroeconomic indicators for the period 2004/05 to 2009/10). Before the floods, real GDP was projected to grow by 4.5 percent in 2010/11, but growth is now expected to slow. With some 12 percent of the cotton crop under water, output may fall by up to 2 million bales of cotton, out of a pre-flood expectation of 14 million bales. In addition, there are significant losses to the rice and sugarcane crops, and the agriculture sector overall has been adversely affected. Given the strong forward linkages in the economy through agro based activities, these losses are likely to cause a slowdown this year in industrial production from the targeted 4.9 percent growth rate. The services sector will also be negatively affected, due to reductions in ownership of dwellings, disruptions in transport, storage and communications, whole sale and retail trade, and losses in finance and insurance, especially if non-performing loans increase significantly. These dampening impacts are likely to be offset only in part by higher construction and public administration activity as the rehabilitation efforts get underway. 8. During 2009/10, headline inflation averaged a relatively high 11.7 percent, but it had been expected to decelerate significantly this year. A temporary acceleration in food price inflation is now anticipated as a result of flood damages to crops, vegetables, fruits, and livestock (many of those that survived now lack feed and fodder). Supply disruptions are also contributing to price increases, which are beginning to be reflected in the data. For example, the weekly sensitive price index (tracking prices of essential kitchen items), was 16.7 percent higher in the week ending August 26, 2010 than the corresponding week a year earlier, showing a two percentage point acceleration from the rate registered just before the flooding began. The State Bank of Pakistan (SBP, the central bank) is moving to mitigate price pressures, and raised the policy interest rate by 50 basis points to 13 percent in July. 9. The budget is under strain. The 2009/10 fiscal deficit was 6.3 percent of GDP (compared to a target of 5.1 percent), owing to a substantial overrun on electricity subsidies, shortfalls in tax revenues and larger than envisaged federal development spending. The 2010/11 budget targeted a fiscal deficit of 4 percent of GDP, and although this target will require substantial revenue mobilization and a surplus at the provincial level, the government seeks to meet this goal, before the impact of the floods. While the more detailed assessment is still in progress, there is no doubting that the floods will entail heavy fiscal costs. Tax revenue may decline as economic activity weakens, while expenditures increase with relief and recovery related efforts. Various measures are under consideration, including cash and housing grants to households who have lost their livelihoods and homes. Restoring basic public infrastructure and services (roads, bridges, railway tracks, irrigation systems, schools, health centers, and power sector installations) will also require substantial outlays. Rationalizing and reprioritizing the existing development budget could yield some fiscal space, but overall, the floods may add significantly to the budget deficit in 2010/11. 10. Even before the floods, the current account deficit was projected to widen in 2010/11 from the 2 percent of GDP registered in 2009/10. The disaster is expected accentuate this trend, mainly by increasing the trade deficit. Export performance may weaken, as the textile sector is impacted by the need to source some 2 million bales of cotton that may have been lost due to crop damage, and a promising new export – cement – will now have to be diverted to domestic consumption. In contrast, reconstruction and rehabilitation will require a significant increase in imports particularly of food, medicines, fuels, construction materials, and machinery. Workers’ remittances are likely to continue playing an important role in financing household consumption in Pakistan. Still, substantial external finance will need to be motivated in order to sustain international reserves, which remained steady at US$12.2 billion at the end of August, 2010, equivalent to about 3.6 months of next year’s imports.

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Relief Efforts 11. The GoP moved swiftly to implement relief operations, though the scale and extent of the disaster has strained its institutional capacity. More than 1.3 million people have been rescued in helicopters, boats and emergency vehicles, and hundreds of relief camps have been set up. Several international and national relief organizations have also been active, despite the continuing heavy rainfall hampering access.

12. The recent floods are of a magnitude and scale that would stretch the capacity and resources of any government, society, and economy. Relief and recovery requirements are enormous, straining public infrastructure, services, and fiscal resources beyond limits, and in many cases leaving critical needs unmet. The National Disaster Management Authority (NDMA) is coordinating the efforts of the GoP, the provincial counterparts, the development partners, and other stakeholders. The Planning & Development Division has been designated by the GoP to lead efforts towards medium- and long-term rehabilitation and reconstruction. The international donor community is stepping up its efforts to provide assistance, starting with the more than US$1 billion that has been pledged so far for relief and early recovery in flood affected areas.

13. Upon the request of the GoP for emergency assistance, and in close coordination with other donors, the Bank is responding to the unfolding disaster in the following ways:

Damage and Needs Assessment: To guide the development of a comprehensive strategy for recovery, the GoP requested the World Bank and the Asian Development Bank (ADB) to undertake a DNA. The process began in mid-August and is expected to be completed by October 15, 2010. The purpose of the assessment is to: (i) provide a damage and needs overview in key physical, productive, and social sectors, as well as cross-cutting areas of hazard risk management, flood management, economic policy, and governance; (ii) identify short, medium, and long-term needs and priority interventions; and, (iii) guide the design and prioritization of investment as well as other proposed recovery and reconstruction activities. A parallel Early Recovery Needs Assessment is being undertaken by One United Nations.

Emergency financing: The GoP requested emergency financing of approximately $1 billion, including the proposed Additional Financing and Restructuring to cover elevated import needs generated by the disaster.

Environmental Safeguards: An Environmental and Social Screening Assessment Framework (ESSAF) is being prepared as an umbrella document to be used on the proposed operations under flood emergency. The ESSAF includes an annex – General Guidelines on Environmental, Health, and Safety – prepared by the World Bank and IFC, which covers Health, Safety & Environment aspects in relation to potential environmental concerns arising out of some of the proposed projects. The borrower will ensure compliance and implementation of its own SOPs and the general guidelines given in ESSAF.

Short to medium-term recovery: World Bank staff have also been collaborating with the GoP to reprogram existing projects in the portfolio, in order to provide high-priority and fast-disbursing assistance for recovery. This is a quicker and more flexible way to meet Pakistan’s short- and medium-term recovery needs than designing and implementing a new multi-sectoral flood recovery project. It is anticipated that several ongoing operations will be restructured within existing credit amounts and used to finance recovery needs.

Long-term reconstruction: Over the course of the next few months and on the basis of the DNA, the GoP will be preparing a long-term reconstruction program for presentation at the United Nations General Assembly Special Session on Pakistan Floods in mid-September 2010, as well as at the Ministerial Meeting of the Friends of Democratic Pakistan in mid-October, and the

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Pakistan Development Forum subsequently. In addition, and consistent with the World Bank’s emphasis on institutional development, the Bank is working with GoP counterparts and other partners on ways to strengthen Pakistan’s institutional capacity to effectively deal with the needs arising from recovery.

14. In designing its response to the emergency, the team has drawn from previous experiences and emergencies in other regions including the Pakistan Earthquake of 2005, the Earthquake in Haiti in 2010, and the flooding in Nepal and India in 2008. Bank staff representing a range of sectors, as well as key specializations in financial management, legal, disbursement, and procurement, have been mobilized in the effort, assisted by the Bank’s Global Facility for Disaster Reduction and Recovery (GFDRR).

IV. RATIONALE FOR ADDITIONAL FINANCING AND RESTRUCTURING

15. The proposed Additional Financing and Restructuring aims to support floods recovery efforts with fast disbursing import financing. While a fuller assessment is still under preparation as a part of the DNA, the floods are precipitating a sharp increase in imports, such as food, medicines, tents, construction materials, machinery, and fuel, even greater than the period after the 2005 earthquake (which was estimated to have caused a direct increase in imports of about US$1 billion). Fuel is a key category of imports, including motor gasoline, jet fuel, and diesel, which are essential for sustaining the recovery and reconstruction effort. The operation proposes to disburse the full US$300 million in Additional Financing against imports of these items (specified on a positive list in Annex 5).

16. The NDMA estimates that substantial amounts of jet fuel are being used by helicopters and fixed wing aircraft flying rescue and relief operations. In addition, heavy machinery, trucks, buses and other mechanized vehicles have also required huge quantities of diesel and gasoline to date in their engagement in flood response. Finally, as noted above, the PARCO refinery was closed on August 7, 2010, because of flood damage to roads and bridges which provide access to the refinery. Repairs are expected to take at least 5-7 weeks, suspending operations until the second-half of September. PARCO accounts for some 20 percent of Pakistan’s refinery capacity, monthly producing 60,000 tons of motor gasoline, 60 tons of jet fuel and 100,000 tons of diesel fuel. The closure translates into a loss of fuels worth over US$150 million, which will need to be imported in order to sustain adequate fuel supplies in the country.

17. The combined impact of the recovery related fuel usage and damage to the domestic energy infrastructure due to the floods is placing a significant strain on the balance of payments. Annex 6 provides estimates of PSO imports of motor gasoline, jet fuel, and high speed diesel, which sum to over US$3.8 billion in the relevant period between August 1, 2010 and the project closing date of May 31, 2011. Given the wide scope of flood damage across Pakistan, at least 20 percent of these fuel imports may be attributed to flood recovery and reconstruction activities. Adding the loss of fuels associated with the closure of PARCO, it is estimated that at least US$1 billion in imported fuel supplies may be attributed as having been necessitated by the flooding disaster, and the fuels category of imports will fully absorb the proposed import financing. The Additional Financing would help alleviate pressure on the balance of payments and ensure that adequate supplies of fuel are available to sustain recovery and rehabilitation operations.

18. The Bank Group’s Country Partnership Strategy (CPS) 2010-2013 is aimed at helping Pakistan address some of its major institutional, policy and financing constraints, and sustain high economic growth rates, manage conflict, and improve human development. The four pillars of the CPS focus on: (i) strengthening economic governance; (ii) improving human development and social protection; (iii) bettering infrastructure to support growth; and (iv) enhancing security and reducing the risk of conflict. In helping respond to the disaster, the proposed Additional Financing and Restructuring contributes

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directly to the second and third pillar. Subsequent flood response initiatives will contribute to the other pillars, as well as the focus on “improving Disaster Risk Management” within pillar two.

19. As Additional Financing and Restructuring on the Earthquake ERC, the proposed operation builds on the Bank’s existing engagement on disaster reconstruction and risk reduction in Pakistan. At the request of the GoP, the Earthquake Damage and Needs Assessment was undertaken by the World Bank, the ADB and other partners in 2005. This was followed by the US$400 million Earthquake ERC, which was approved on December 15, 2005. As a part of the earthquake response, the Bank also provided US$238 million in additional financing to the Pakistan Poverty Alleviation Fund for earthquake relief and rehabilitation, which leveraged a further US$26 million from the International Fund for Agricultural Development. This project had strong community participation in reconstruction and was also rated satisfactory. Additional financing on a province level project was also extended to the Government of KP for earthquake relief. Finally, the current initiative builds on other experiences in preparing Damage and Needs Assessments, including Emergency Cyclone Damage and Needs Assessment of Balochistan and Sindh (2007), and the Post-Crisis Damage and Needs Assessment of KP and FATA (2009).

20. It is worth noting that the proposed Additional Financing and Restructuring meets the requirements of OP/BP 13.20, in that implementation of the Earthquake ERC is satisfactory, and the additional loan is economically justified. The original credit has disbursed over 97 percent of the credit amount, with the Housing Reconstruction, Livelihoods Support and Import Financing components of the ERP have been fully disbursed.5 The most recent assessment of the project rates the current implementation progress as highly satisfactory, and the achievement of the developmental objective as satisfactory. The 2008/2009 Audited Financial Statement from the implementing agency (ERRA) were conveyed on January 6, 2010 and are acceptable to the Bank.

V. PROPOSED CHANGES

21. The proposed Additional Financing and Restructuring on the Earthquake ERC is part of the first phase of the World Bank’s strategy to assist in post-floods recovery in Pakistan. It would support the efforts of the GoP to: (i) Reduce the immediate suffering resulting from the effects of the 2005 earthquake, and restore livelihoods destroyed by the 2005 earthquake; (ii) Restore basic services to the affected population and rebuild public infrastructure destroyed by the 2005 earthquake; (iii) Start the recovery and reconstruction process from the 2005 earthquake; and (iv) Enhance the resources available to adequately meet the early recovery needs of people affected by the 2010 floods.

22. The size of the proposed Additional Financing, at US$300 million equivalent, is based on the GoP’s request for emergency assistance and the evident requirement of greater imports. The proposed Additional Financing will reimburse funds on the basis of expenditures incurred by the GoP on fuel imports needed to sustain recovery and reconstruction efforts, which will be determined on the basis of import Bills of Lading and proof of payment.

5 The Earthquake ERC became effective on January 19, 2006 and has disbursed US$403.8 million to date (more than the original project amount due to favorable SDR – US$ exchange rate movements).

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Table 2. Costs by Component (US$ million) Component Original cost Changes with

AF Revised cost

1. Housing 220 - 220 2. Livelihood Support 85 - 85 3. Import Financing 85 300 385 4. Capacity Building 10 - 10 Total 400 300 700

23. No changes are proposed to the design and modalities of Component 3 as defined and appraised during the preparation of the initial Earthquake ERC.

Project Development Objectives:

24. The Additional Financing and Restructuring involves broadening in the scope of the project development objectives:

To support the efforts of the Government of Pakistan to: (i) Reduce the immediate suffering resulting from the effects of the 2005, and restore livelihoods

destroyed by the 2005 earthquake; (ii) Restore basic services to the affected population and rebuild public infrastructure destroyed

by the 2005 earthquake; (iii) Start the recovery and reconstruction process from the 2005 earthquake; and (iv) Enhance the resources available to adequately meet the early recovery needs of people

affected by the 2010 floods. Key Performance Indicators:

25. The following indicators, to be monitored quarterly, will be used to review the implementation of the Additional Financing and Restructuring:

(i) Stocks of motor gasoline needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 10 days worth of consumption) during the period of import financing (New).

(ii) Stocks of Jet A-1 needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 10 days worth of consumption) during the period of import financing (New).

(iii) Stocks of high speed diesel needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 15 days worth of consumption) during the period of import financing (New).

(iv) Value (in millions of US$) of certified Bills of Lading for fuels (detailed on the positive list of imports in Annex 5) needed for recovery operations (Revised).

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VI. FIDUCIARY ASPECTS AND SAFEGUARDS

26. The overall fiduciary risk associated with the proposed operation is rated as ‘Moderate’.6 The GoP’s commitment to public financial management reforms is exemplified by actions already taken. Progress has been made in terms of the accuracy, comprehensiveness, reliability, and timeliness of financial and fiscal reporting; enhanced accountability and transparency; the use of financial information for informed decision-making; and oversight of the use of public monies through risk-based audits. Disbursements for this component will be transaction based made against withdrawal applications to be submitted every month until the completion of disbursement after which the Ministry of Finance will provide a written confirmation certifying the receipt of the Rupees equivalent of the Credit into the Consolidated Fund Account of the GoP, the date of the receipt, and the exchange rate applied to translate the credit currency into Rupees. A direct link between the goods covered under import financing and their usage in flood related activities is not entirely possible. The disbursement will be made as reimbursement of import expenses based on provision of proof of import and payment and a letter of comfort providing assurance that the imported items are used for intended purposes. Acceptable annual audited financial statements will be provided to the Bank by December 31, 2011. The Auditor General of Pakistan is acceptable to the Bank as auditor for this operation.

Procurement

27. A positive list of items for import financing has been agreed with the GoP (Annex 5). Procurement will be carried out in accordance with the Bank's Procurement Guidelines (Guidelines. Procurement under IBRD Loan and IDA Credits of May 2004 revised October 2006 and May 2010). Up to 40 percent of the Credit amount may be applied by the Borrower to contracts for goods on the positive list made between August 1, 2010 and the expected date of signing of the Financing Agreement, and will be eligible for retroactive financing, provided procurement procedures acceptable to the Association have been followed.

28. Commonly traded commodities may be procured under the Credit by the public sector through established international commodity markets as defined in Clause 2.68 of the Bank's Procurement Guidelines, or through simplified procurement procedures in accordance with the Bank's Procurement Guidelines (Table P1). All contracts would be subject to a post review by the Bank. The post review will consist of verification of import documentation, including commercial invoices, Bills of Lading and import Bills of Lading (Customs) provided and certified by the State Bank of Pakistan.

29. Goods other than commodities procured by the public sector under this Credit would follow simplified international competitive bidding, in accordance with the Bank’s Procurement Guidelines (Clauses 2.66 and 2.67). However, to facilitate the speedy import of items required immediately for the recovery effort, public sector agencies would be able to use Shopping procedures, in accordance with Clauses 3.5 of the Bank's Procurement Guidelines, for contracts of value less than US$3 million each up to a period of one year from the date of the Financing Agreement. All contracts would be subject to a post review by the Bank.

6 Being based on import Bills of Entry, the proposed import financing for fuels are tracked to the point of entry into Pakistan, after which the fuels enter the regular distribution network. The corresponding financing flows into a foreign exchange account of the SBP followed by a corresponding transfer of Pakistani rupees into the GoP’s consolidated fund, as described in paragraph 36 below.

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Table 4. Summary of Procurement Procedures for Items on the Positive List

Procurement Category (refer to positive list in Annex 5)

Procurement Method

Public Sector Procurement:

Commodities Through established international commodity markets, or other channels of competitive procurement as defined in Clause 2.68 of the Bank's Procurement Guidelines

Goods Simplified competitive bidding procedures under Clauses 2.66 and 2.67of the Bank's Procurement Guidelines. Public sector agencies would be able to use international shopping procedures, in accordance with Clause 3.5 of the Bank's Procurement Guidelines for contracts of value less than US$3,000,000 up to one year from the date of the signature of the Financing Agreement.

Public Financial Management

30. A Federal level Public Expenditure and Financial Accountability (PEFA) assessment was completed in June 2009.7 It noted that reforms underway have contributed towards improvements in public financial management systems. Most notable are the ones initiated under the Project to Improve Financial Reporting and Auditing (PIFRA) funded by the Bank and the implementation of a Medium Term Budgetary Framework which is supported by DfID. Donor-funded projects and a number of self accounting entities remain outside the government financial management information system. The GoP is yet to develop an effective internal audit function and continuing efforts are needed to improve the effectiveness of tax collection and the management of cash balances impacting the predictability in availability of funds.

31. A Public Expenditure, Procurement and Financial Management review was completed in 2010. The review concluded, inter alia, that expenditure effectiveness would be fostered by a concerted review and revision of government business processes to eliminate redundant procedures in expenditure commitment and payments, particularly for the development budget.

32. PIFRA supported the introduction of a new accounting model, an IMF GFS-compliant Chart of Accounts (CoA) for the general government. The mapping of the new accounting model CoA to GFSM 2001 is substantially complete, including full coverage of the Public Account and financing data.

33. Timeliness of end-year financial reporting has improved at the federal level and in all provinces and districts owing to the introduction of the automated budget management system. Within 12 to15 days of the end of each month, civil accounts are prepared and presented to the Ministry of Finance. Year-end financial statements have been prepared on the International Public Sector Accounting Standards (IPSAS) basis by the federal government and all provinces. District governments have also transitioned to this form of reporting as part of Government’s international financial reporting regime.

7 The PEFA PFM Performance Measurement Framework (known as the PEFA Framework) has been developed to assess and develop essential PFM systems, by providing a common pool of information for measurement and monitoring of PFM performance progress, and a common platform for dialogue. The PEFA Program is a multi-donor partnership between the World Bank, the European Commission, and the UK’s Department for International Development, the Swiss State Secretariat for Economic Affairs, the French Ministry of Foreign Affairs, and the Royal Norwegian Ministry of Foreign Affairs, and the International Monetary Fund.

15

34. To enhance the effectiveness of external audit, a risk-based audit methodology compliant with international standards is being applied to the federal government accounts and to the financial statements of provinces and some districts. In addition, efficiency has improved through the use of Computer Assisted Audit Techniques and the application of systems-based audit methodology. The 2008-09 financial statements along with the audit reports of Federal, all four Provinces and state owned enterprises were completed by end-January 2010 and submitted to the President and respective Governors by end-February 2010.

35. Legislative oversight across the federal and provincial governments has seen a marked improvement over the last few years. Enormous efforts have been made by Federal, Punjab, and KP Public Accounts Committees to reduce the backlog of un-discussed audit reports and audited accounts, which was due to recurring interruptions of legislative oversight in the past.

i. Funds Flow Arrangements

36. The Government of Pakistan will identify a Foreign Exchange Account with SBP, which forms part of the country’s official foreign exchange reserves, into which the proceeds of the Credit will be disbursed. The Rupees equivalent of the funds in the Account will, within two working days, be transferred into the Consolidated Fund of the Government of Pakistan (Account No. 1–Non-Food) held with SBP.

ii. Disbursements

37. Disbursements will be transaction-based and made against withdrawal applications for reimbursements submitted by the Planning & Development Division which is the implementing agency for the Import Financing Component. Withdrawals are to be made every month until the disbursement for this component is complete. Under the present arrangements, the fuels noted on the positive list will be imported by Pakistan State Oil (PSO) and enter into the regular domestic distribution network. As such, it will not be practicable to specify and identify a 100 percent linkage between Bank disbursements and flood related expenditures incurred by the government. Nonetheless, the GoP will provide reasonable assurance in the form of a letter of comfort that the proceeds of the additional financing are used to cover flood related expenses. The cost of imports as per the positive list will therefore be reimbursed based on:

Proof of import i.e. the Bills of Lading;

Proof of payment such as retirement documents of Letter of Credit related to the imported items; and

A letter of comfort from the PC certifying that the consumption of imported fuels financed by this operation is related to flood recovery, reconstruction or rehabilitation activities.

38. The Credit will be disbursed over a period of up to ten months. Allocation of Credit proceeds per disbursement category is indicated in the table below.

Allocation of Credit Proceeds Category Amount of Credit

(expressed in USD) Percentage of Expenditures to

be Financed Goods under Part 3 of the Project 300,000,000 100%

TOTAL AMOUNT 300,000,000 IDA financing is inclusive of import duties and taxes

16

iii. Retroactive Financing

39. Retroactive financing of up to 40% of the amount of the Credit will be provided for eligible expenditures incurred from August 1, 2010 to the date of signing of the Credit.

iv. Accounting, Assurance and Auditing

40. The Planning & Development Division will maintain records to support the amounts claimed for usage in flood-related recovery, reconstruction or rehabilitation activities. These will be made available for audit and verification purposes to the Bank.

41. Within 45 days of the completion of disbursement of the Credit, the Ministry of Finance will provide a written confirmation certifying the receipt of the Rupees equivalent of the Credit into the Consolidated Fund Account of the GoP, the date of the receipt, and the exchange rate applied to translate the credit currency into Rupees.

42. Annual financial statements for the Project will be prepared in accordance with cash basis international public sector accounting standards. These will include information on utilization of the imported items from the positive list in flood-related recovery, reconstruction or rehabilitation activities.

43. External audit will be conducted by the Supreme Audit Institution, i.e., the Office of the Auditor General of Pakistan, which is acceptable to the Bank. Acceptable audited financial statements for the project will be submitted within 6 months of the close of the financial year.

Audit Report Type Due Date Project Financial Statements for Financial Year ended June 30, 2011.

December 31, 2011.

v. Conditionality

44. The funds from the Project will be not be used for military or paramilitary purposes.

Safeguards

45. Since the environmental category of the original Earthquake ERC is B, the environmental category of the additional financing, which uses the import financing component of the original project, will remain the same. Import financing does not involve or support any specific construction activities, so no new EMP/EA (part of the Bank's environmental safeguards requirements) is envisaged. As noted above, an Environmental and Social Screening Assessment Framework (ESSAF) was prepared as a part of the original Earthquake ERC, and a revised / updated ESSAF is being prepared for the floods ERC project (expected at the end of 2010). It is to be an umbrella document covering the majority of the proposed operations under flood emergency. The borrower will ensure compliance and implementation of its own SOPs and the general guidelines given in ESSAF. Since storage, handling and transportation of fuels is a routine business for the fuel companies with adequate Health, Safety & Environment system in place, there is no need to create any further hierarchy within for the project component being financed by the Bank. The project does not expect any large scale, significant and or irreversible environmental impacts arising due to the proposed interventions to be supported through import financing.

17

VII. APPRAISAL SUMMARY

46. Appraisal was completed by September 14, 2010. The Bank team, including procurement and financial management colleagues, met with counterparts from the Planning & Development Division (the designated implementing agency), the NDMA and PSO. The proposed import financing was discussed in detail, noting that the intent of the financing instrument was to provide liquidity and help finance the GoP’s overall response to the emergency and protect its fiscal accounts. It was also highlighted that the Bank’s emergency procedures allow for the financing of public and private sector expenditure on a positive list of goods, both domestic and imported, required for Pakistan’s emergency recovery program. As such, the teams agreed on meaningful and feasible monitoring indicators described above and in the results framework, as well as the modalities of the financing, based on import bills of lading, proof of payment, and a comfort letter. All parties emphasized the importance of swift processing.

Procurement

47. It is expected that the GoP will utilize the funds under this credit for the import of fuel. The fuels expected to be imported under this facility are (i) MOGAS or Motor Gasoline (ii) Jet A1 Fuel and (iii) High Speed Diesel. These imports will be procured by Pakistan State Oil (PSO) using established industry practices. Items (i) and (ii) are procured through open tender processes. Advertisements are placed in leading local and international newspapers and on the Public Procurement Regulatory Authority (PPRA) website, based on demand generated. Tenders are opened publicly in the presence of bidders, the PSO and a MPNR representative. Any bids not fulfilling bidding criteria, or conditional bids, are rejected on the spot in the presence of the bidders. Conforming bids are evaluated by a committee and the lowest evaluated bidder is offered a contract. The pricing mechanism is based on Arabian Gulf Median, as quoted by Platt's, using the average of prices two days prior and post the Bill of Lading date, plus a premium that the supplier quotes. The award decision is approved by the PSO management committee. Item (iii) is imported from Kuwait Petroleum Company (KPC), based on a long term government to government contract between the governments of Kuwait and Pakistan. KPC is offered the right of first refusal, and if they cannot supply the needed fuel, then spot tendering is carried out in the manner described above. The contract is renewed every three years and the premium is reviewed every 60 days. It is understood that the KPC is the supplier of choice because they are the most reliable supplier in the region, and also because it does not make commercial sense to import from outside the regional markets. It was explained that the premium paid is competitive. The pricing mechanism is the same as described above.

Financial Management and Disbursement

48. Disbursements for this component will be transaction based made against withdrawal applications to be submitted every month until the completion of disbursement after which the Ministry of Finance will provide a written confirmation certifying the receipt of the Rupees equivalent of the Credit into the Consolidated Fund Account of the GoP, the date of the receipt, and the exchange rate applied to translate the credit currency into Rupees. A direct link between the goods covered under import financing and their usage in flood related activities is not entirely possible. The disbursement will be made as reimbursement of import expenses based on provision of proof of import and payment and a letter of comfort providing assurance that the imported items are used for intended purposes. Acceptable annual audited financial statements will be provided to the Bank by December 31, 2011. The Auditor General of Pakistan is acceptable to the Bank as auditor for this operation.

18

Annex 1: Results Framework and Monitoring Indicators

Revisions to the Results Framework Comments/ Rationale for Change

PDO Current (PAD) Proposed To support the efforts of the Government of Pakistan to: (i) Reduce the immediate suffering

resulting from the effects of the earthquake and restore livelihoods destroyed by the earthquake;

(ii) Restore basic services to the affected population and rebuild public infrastructure; and

(iii) Start the recovery and reconstruction process.

To support the efforts of the Government of Pakistan to: (i) Reduce the immediate suffering

resulting from the effects of the 2005 earthquake, and restore livelihoods destroyed by the 2005 earthquake;

(ii) Restore basic services to the affected population and rebuild public infrastructure destroyed by the 2005 earthquake;

(iii) Start the recovery and

reconstruction process from the 2005 earthquake; and

(iv) Enhance the resources available to

adequately meet the early recovery needs of people affected by the 2010 floods.

The proposed Additional Financing and Restructuring operation will help the authorities respond to the recent floods disaster by providing import financing for fuels – an essential support to the recovery operations being under by the GoP and other partners.

PDO indicators Current (PAD) Proposed change* - New Indicators Number of Bills of Lading for the goods procured.

(i) Stocks of motor gasoline needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 10 days worth of consumption) during the period of import financing (New).

(ii) Stocks of Jet A-1 needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 10 days worth of consumption) during the period of import financing (New).

(iii) Stocks of high speed diesel needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 15 days worth of consumption) during the period of import financing (New).

19

Intermediate Results indicators Current (PAD) Proposed change* (i) Value of certified Bills of Lading

for fuels (detailed on the positive list of imports) needed for recovery operations (Revised).

* Indicate if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end of project target value

20

Revised Project Results Framework

Project Development Objective (PDO):

To support the efforts of the Government of Pakistan to:

(i) Reduce the immediate suffering resulting from the effects of the 2005 earthquake and the 2010 floods, and restore livelihoods destroyed by the 2005 earthquake and the 2010 floods;

(ii) Restore basic services to the affected population and rebuild public infrastructure destroyed by the 2005 earthquake;

(iv) Start the recovery and reconstruction process from the 2005 earthquake;

(v) Enhance the resources available to adequately meet the early recovery needs of people affected by the 2010 floods.

PDO Level Results Indicators8

Cor

e UOM9

Baseline Original Project Start

(2005)

Progress To Date

(Aug. 2010)10

Cumulative Target Values11

Frequency

Data Source/

Methodology

Respon-sibility

for Data Collec-

tion

Com-ments

Sept. 2010

Oct. 2010

Nov. 2010

Dec. 2010

1. Stocks of motor gasoline needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 10 days worth of consumption) during the period of import financing.

Days 8 6 10 10 10 Monthly Pakistan State Oil (PSO)

Planning & Develop-ment Division

2. Stocks of Jet A-1 needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 10 days worth of consumption) during the period of import financing.



8 Please indicate whether the indicator is a Core Sector Indicator (for additional guidance – please see http://coreindicators). 9 UOM = Unit of Measurement. 10 For new indicators introduced as part of the additional financing, the progress to date column is used to reflect the baseline value. 11 Target values should be entered for the years data will be available, not necessarily annually. Target values should normally be cumulative. If targets refer to annual values, please indicate this in the indicator name and in the “Comments” column.

21

3. Stocks of High Speed Diesel needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 15 days worth of consumption) during the period of import financing.



Beneficiaries12

Project beneficiaries,

Number (million) 20 20 20 20 20 Monthly NDMA NDMA

Flood affect-ees

Of which female (beneficiaries)

Number (million) 10 10 10 10 10 Monthly NDMA NDMA

About49%

Intermediate Results and Indicators

Intermediate Results Indicators

Cor

e UOM

Baseline Original Project Start

(2005)

Progress To Date

(Aug. 2010)

Target Values

Frequency

Data Source/ Method-

ology

Respon-sibility

for Data Collec-

tion

Com-ments

Sept. 2010

Oct. 2010

Nov. 2010

Dec. 2010

Intermediate Result 1: Importing adequate supplies of fuel.

1. Value (in US$ millions) of certified Bills of Lading for fuels (detailed on the positive list of imports) needed for recovery operations.

US$ (mn) 120 90 90 Monthly SBP


12 All projects are encouraged to identify and measure the number of project beneficiaries. The adoption and reporting on this indicator is required for investment projects which have an approval date of July 1, 2009 or later (for additional guidance – please see http://coreindicators).

22

Annex 2: Operational Risk Assessment Framework (ORAF)

Project Development Objective(s) The Project Development Objective is to support the efforts of the Government of Pakistan to:

(i) Reduce the immediate suffering resulting from the effects of the 2005 earthquake and restore livelihoods destroyed by the 2005 earthquake;

(ii) Restore basic services to the affected population and rebuild public infrastructure destroyed by the 2005 earthquake; (iii) Start the recovery and reconstruction process from the 2005 earthquake; and (iv) Enhance the resources available to adequately meet the early recovery needs of people affected by the 2010 floods.

PDO Level Results Indicators: 1. Stocks of motor gasoline needed for recovery operations maintained at adequate levels (Pakistan State Oil

targets 10 days worth of consumption) during the period of import financing (July 1, 2010-May 31, 2011).

2. Stocks of Jet A-1 needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 10 days worth of consumption) during the period of import financing

3. Stocks of high speed diesel needed for recovery operations maintained at adequate levels (Pakistan State Oil targets 15 days worth of consumption) during the period of import financing.

4. Value of certified Bills of Lading for fuels (detailed on the positive list of imports) needed for recovery operations.

23

Risk Category

Risk Rating

Risk Description Proposed Mitigation Measures

Project Stakeholder Risks

L Stakeholder interests include a wish to see stocks maintained at adequate levels and that the financial resources are actually used for the stated purpose. There is a risk of sporadic shortages (as evidenced by reports of filling stations having run dry), and that fuel imports may be absorbed by other, less pressing demands.

All reasonable assurances from PSO to keep stocks at appropriate levels, and from the GoP that the import financing for fuels will be applied to flood recovery and reconstruction activities.

Implementing Agency Risks

M‐I The Planning & Development Division is the country’s premier agency to approve and monitor development projects. It also provides help to other government ministries and agencies in preparation of projects. However, it may be lacking in certain administrative and technical skills required for implementing projects, which can result is some delays. The risks associated with PSO appear minimal, since flood related imports are only a fraction of the imports PSO has been handling for many years. A clear mandate for wider flood recovery and rehabilitation activities is still being established. Corruption concerns about the Planning & Development Division are significantly less than that for the overall government. PSO regularly handles large transactions and appears to have adequate financial management and procurement systems in place.

Given the expected quick disbursement of the project, Bank staff will provide close support to ensure swift implementation. The proposed import financing is not likely to be overly taxing on the existing coordination mechanisms. Development partners are working with the GoP to strengthen flood response implementation arrangements for the wider programs envisaged. The Planning & Development Division is also expected to benefit from the ongoing improvement in financial management and procurement practices., (as mentioned above for the wider GoP).

24

Project Risks

Design

M‐I Fuel usage specifically for flood response cannot reasonable be determined.

The risk is mitigated by ascertaining that at least as much fuel as is financed by the

Social and Environmental

L The expected improvement in the fuels supply situation may help reduce possible social frictions arising from shortages.

Project design aims to facilitate the maintenance of adequate supplies.

Program and Donor

L There are no reputational risks for the World Bank expected from this operation.

Quick disbursing and timely assistance for flood response will contribute to positive public perceptions.

Delivery Quality

M‐I The funds are to be disbursed on the basis of Bills of Lading for imports of goods on the positive list, which then enter the regular distribution channels. This makes it difficult to ascertain that the IDA financed imports are being used for the intended purposes.

The GoP (Planning & Development Division) has agreed to provide a letter of comfort as a document accompanying every withdrawal application, indicating that the application is only for imports which are being used for flood-related activities.

Overall Risk Rating at Preparation Overall Risk Rating During

Implementation Comments

MI MI

As a short-duration AF, comprising only the financing of imports of fuel commodities to support flood relief operations, a rating of Medium – I appears appropriate. The main risks appear to relate to the sustainability of the macroeconomic framework, potential for complications in procurement arrangements and difficulties in relating the funds disbursed to actual relief activities.

25

Final Decision Meeting Rating:

Appraisal Decision Chair Risk Rating: Preparation Risk Rating: Implementation Date Comments

Overall Risk

M-L M-I September 16, 2010

As a short-duration AF, comprising only the financing of imports of fuel commodities to support flood relief operations, a rating of Medium – I appears appropriate. The main risks appear to relate to the sustainability of the macroeconomic framework, potential for complications in procurement arrangements and difficulties in relating the funds disbursed to actual relief activities.

26

Annex 3: Summary of Relief Items Provided as of September 16, 2010

Table A3 – 1. Summary of Relief Items Provided as of September 16, 2010

Source: National Disaster Management Authority

TotalBlankets 521993Buckets 1591Cholera Kits 149Clothes 16851Dates (Tons) 269De-Watering Pumps 117Emergency Medicines Kits 72Emergency Drinking Water Kits 2290Foam Bed/Mat 900First Aid Box 784Food Items (Tons) 49977Generators 1120Hygiene Kits 5817Jerry Cans 23486Jackets 8069Kerosene Stove 2458Kitchen Sets 116462Mosquito Nets 3732Medicines (Population) 4714550MREs 438002

Plastic Mats68823 +46 Rolls

Soap 4710Squatting Plates 650Tents 288991Towels 2930Tarpaulin 383272Torch Lights 4608Water Tanks 121Water Purification Unit 65Water Purification Kits 33464Water Bottles 77737Helicopter 61Boats Available 1238Person Rescued 1384400

302428497

3243

26584 6000

923909 1690

174000 2340

1580300

0 0

180

6550

240001015000

650

2

303294

02501540

011561 5660

285

06000

2012

746

46

126750

6137

18 0

1521

0

3480

260

18700 +10 Rolls 2200

1500

12000

0

22560

0 13632

0

0

501890

149 070

430

5553

0

17231 116575

35 43

0

650

10898+22 Roll

93876

0

1247

349781 63803

5000 6046

4112 25621

24

16

670

40 2038 103293

1185 1838

2070

4000

17394 31952

166 1661528

5354

0

605150

4667

0 390000423550 2215000

600 982

750

0 0

0

0 0

0 3149

30

290

0 3554

0 174224

504

0

239

20460 15200

0

2 10

000 0

085000

0

2410

0

0

264 0

00

300 0

1000

0

2035

0 0

0

0

3004536

05275

922

00

4299

26 13

50953 38149616

24630

16

150 485 58720 0 1

01

116

79911 202108

13150020

1608

1620

46306750

97000012002

18120 + 14 Rolls

51735

49489

0

01500

1000856032

0 13800 101040

10

GBBalochistanKP

(incl. FATA) Punjab Sindh AJ&K

27

Annex 4: Key Macroeconomic Indicators

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10Prov.

Output and pricesReal GDP at factor cost (percent) 9.0 5.8 6.8 3.7 1.2 4.1Consumer prices (percent, period average) 9.3 7.9 7.8 12.0 20.8 11.7

Public finances Total Revenues (% of GDP) 13.8 14.2 14.9 14.4 14.4 14.2 Tax revenue (% of GDP) 0.0 10.6 10.2 10.6 10.2 10.0 of which: Federal Board of Revenue (% of GDP) 9.1 9.3 9.6 9.8 8.8 ..Total Expenditures (% of GDP) 17.2 18.5 19.1 21.7 19.0 20.5

Consolidated government budget balance (include. earthquake related exp. But exclu. grants)

-3.3 -4.3 -4.3 -7.2 -4.6 -6.3

Total government debt 62.9 57.4 54.1 58.4 55.6 56.4External government debt (% of GDP) 29.4 26.6 24.2 27.0 29.9 32.1Domestic government debt (% of GDP) 33.5 30.8 29.9 31.4 25.7 24.3

Monetary sectorBroad money (annual change in %) 19.3 14.9 19.3 15.3 9.6 12.5Private credit (annual change in %) 33.2 23.2 17.2 16.4 0.7 11.6Six-month treasury bill rate (period average; in %) 4.7 8.2 8.8 9.6 13.1 ..

External sectorMerchandise exports, U.S. dollars (growth rate; in %) 16.2 14.3 4.4 18.2 -6.4 2.7Merchandise imports, U.S. dollars (growth rate; in %) 38.3 31.7 8.0 31.2 -10.3 -2.2Current account balance (as % of GDP) -1.4 -3.9 -4.8 -8.4 -5.6 -2.0Current account balance (US$ millions) -1,534 -4,990 -6,878 -13,874 -9,261 -3,495Gross official reserves (in millions of U.S. dollars) 9,805 10,765 14,302 8,731 9,529 13,953 In months of next year's imports of goods and services 3.5 3.7 3.8 2.6 2.9 3.9Source: Government of Pakistan

Table A4 - 1: Key Macroeconomic Indicators, 2004/05 to 2009/10

28

Annex 5: Positive List of Permissible Imports Table A5 – 1. Positive List of Permissible Imports

Code Description 333 Petroleum oils, crude, and crude oils obtained from bituminous minerals 334 Petroleum products, refined 335 Residual petroleum products, n.e.s. and related materials 511 Hydrocarbons

29

Annex 6: PSO Fuel Imports, Sales and Stocks

Value(US$)

Volume(tons)

Average Monthly

Import $/MTValue(US$)

Volume(tons)

Days of Consumption

Volume(tons)

July 102,295,500 145,100 705 43,581,690 61,818 5 32,827 August 125,102,000 176,200 710 45,696,310 64,361 9 55,687

September 103,305,000 145,500 710 46,731,490 65,819 8 53,490 October 119,919,000 168,900 710 19,236,740 27,094 13 80,043

November 105,632,800 145,100 728 45,997,952 63,184 8 52,759 December 100,604,300 141,100 713 23,399,947 32,819 14 93,226 January 132,380,500 173,500 763 - - 6 53,880 February 96,577,200 125,100 772 53,044,120 68,710 5 33,768 March 157,243,200 192,700 816 26,786,016 32,826 11 70,482 April 133,868,400 168,600 794 51,029,586 64,269 8 45,825 May 127,558,800 167,400 762 80,984,598 106,279 7 51,897 June 124,587,300 180,300 691 26,146,749 37,839 8 54,510 July 125,712,600 184,600 681 55,908,738 82,098 6 44,752

August 126,615,000 183,500 690 66,634,680 96,572 8 60,485 September 140,140,000 196,000 715 85,800,000 120,000 6 41,788

October 148,720,000 208,000 715 85,800,000 120,000 10November 143,000,000 200,000 715 71,500,000 100,000 10December 143,000,000 200,000 715 71,500,000 100,000 10January 145,000,000 200,000 725 58,000,000 80,000 10February 130,500,000 180,000 725 58,000,000 80,000 10March 137,750,000 190,000 725 58,000,000 80,000 10April 130,500,000 180,000 725 58,000,000 80,000 10May 130,500,000 180,000 725 58,000,000 80,000 10

2009

Table A6 - 1. Motor Gasoline Sales, Imports and StocksTotal Sales StocksTotal Imports

2010

2011

30

Value(US$)

Volume(tons)

Average Monthly


Volume(tons)

Days of Consumption

Volume(tons)

July 70,635,200 104,800 674 32,176,760 47,740 12 28,606 August 62,694,000 97,200 645 26,372,760 40,888 22 50,650


November 70,996,200 102,300 694 16,721,236 24,094 22 46,295 December 81,162,000 121,500 668 36,902,324 55,243 16 39,314 January 76,806,600 111,800 687 26,185,005 38,115 14 29,551 February 70,727,000 107,000 661 40,479,640 61,240 10 24,557 March 83,797,600 119,200 703 46,405,733 66,011 13 29,893 April 81,712,400 107,800 758 47,580,418 62,771 12 28,126 May 87,515,000 115,000 761 35,701,554 46,914 9 22,240 June 63,700,700 90,100 707 36,341,921 51,403 14 31,991 July 80,241,600 116,800 687 50,755,560 73,880 7 19,155



Table A6 - 2. Jet A-1 Sales, Imports and StocksTotal Sales StocksTotal Imports

2009

2010

2011

31

Value(US$)

Volume(tons)

Average Monthly


Volume(tons)

Days of Consumption

Volume(tons)

July 330,170,600 613,700 538 177,600,794 330,113 11 343,050 August 571,339,200 965,100 592 169,625,760 286,530 12 348,870


November 441,484,000 703,000 628 203,434,320 323,940 23 625,344 December 338,705,100 561,700 603 237,913,650 394,550 15 462,273 January 423,562,500 677,700 625 207,887,500 332,620 14 30,821 February 259,530,000 422,000 615 203,563,155 330,997 19 487,588 March 452,081,700 688,100 657 188,320,509 286,637 24 612,464 April 498,852,400 703,600 709 223,803,649 315,661 23 542,639 May 388,078,200 582,700 666 308,466,558 463,163 16 485,264 June 389,748,800 605,200 644 251,103,972 389,913 13 392,548 July 424,423,800 664,200 639 258,277,410 404,190 18 453,990



Table A6 - 3. High Speed Diesel Sales, Imports and StocksTotal Sales StocksTotal Imports

2009

2010

2011

32

2009 JulyAugust

SeptemberOctober

NovemberDecember

2010 JanuaryFebruaryMarch AprilMayJuneJuly

AugustSeptember

OctoberNovemberDecember

2011 JanuaryFebruaryMarch AprilMay

Notes: 353,050,000

400,850,000353,050,000353,050,000353,050,000353,050,000

364,941,708249,690,282243,675,000397,650,000400,850,000

727,750,000727,750,000

Total ImportsValue(US$)

253,359,244241,694,830304,739,294304,624,869266,153,508298,215,921234,072,505297,086,915261,512,258322,413,653425,152,710313,592,642

679,250,000689,750,000707,250,000657,750,000700,000,000

578,036,800630,378,000428,665,000592,390,000646,470,000

632,749,600426,834,200693,122,500714,433,200603,152,000

Value of imports are based on actual average monthly import cargoes ($/MT).Value of total sales is estimated basis on of actual average import cargo value. Figures of Sep 2010 till May 2011 are estimated that may change with the maerket dynamics & availability of local production.Product days cover are actual for the months Jul 2009-Sep 2010 - planned for the Oct 2010-May 2011.

Table A6 - 4. Total Value of Motor Gasoline, Jet A-1, and High Speed Diesel Sales and Imports (US$)Total Sales

Value(US$)

503,101,300759,135,200424,621,400623,154,000618,113,000520,471,400

Public Disclosure Authorized - World Bank...2010/09/27 · 2 CURRENCY EQUIVALENTS (Exchange Rate...

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