In an effort to meet a crucial IMF deadline and secure funding from major multilateral agencies, the government has finalized a fiscal strategy outlining that all future investments, including those facilitated by the newly established Special Investment Facilitation Council, must prioritize complete climate resilience.
According to the strategy, the Public Sector Development Programme (PSDP), public-private partnerships (PPP), and the Special Investment Facilitation Council (SIFC) are mandated to undergo a reorientation process focused on climate finance, innovative instruments, carbon credits, and accreditation with global bodies.
One of the key objectives of the ongoing $3 billion Standby Arrangement (SBA) with the IMF involves Pakistan building climate resilience, given the recurrent cycles of extreme weather conditions and natural disasters. The adoption of the ‘Climate-Public Investment Management Assessment (C-PIMA)’ and the PIMA action plan by the federal cabinet is among the three structural benchmarks to be achieved by the end of this year.
Planning Secretary Awais Manzur Sumra briefed the visiting IMF staff mission on the progress made so far. Policy-level discussions, to be led by caretaker Finance Minister Dr. Shamshad Akhtar with the IMF mission, are scheduled to begin after technical rounds of talks and interactions with various ministries, including finance, planning, and energy, as well as regulatory authorities like the National Electric Power Regulatory Authority, Federal Board of Revenue, and the State Bank of Pakistan.
The IMF’s C-PIMA introduces a climate-responsive dimension to the PIMA framework, assessing a country’s capacity to manage climate-related infrastructure. It aims to help governments identify potential improvements in public investment institutions and processes to develop low-carbon and climate-resilient infrastructure.
Multilateral institutions, especially the IMF and the World Bank, have advised the government that future international development and climate funding may be contingent on Pakistan’s national climate investment plans aligning with C-PIMA.
Addressing the challenges of climate change, the Ministry of Planning Development & Special Initiatives unveiled a comprehensive blueprint for tackling climate change and enhancing sustainable development under the National Climate Change Policy (NCCP), as stated in an official statement on Sunday.
The government has made significant progress by revealing the strategy’s blueprint and establishing the Sustainable Finance Bureau (SFB) to transform climate finance. The SFB aims to reorient the PSDP towards sustainable finance, allocating 20 percent (Rs925 billion) of the new PSDP schemes in FY2023-24 to green initiatives, expected to qualify for concessional climate funds, thereby enhancing Pakistan’s capacity to meet its climate targets.
As part of the strategy, the PSDP, PPP, and SIFC portfolios must undergo reorientation for climate finance, innovative instruments, carbon credits, and accreditation with global bodies.
The government, committed to the IMF since July, is set to complete the UN Framework Convention on Climate Change-backed National Adaptation Plan (NAP) by mid-2024. Priority measures include strengthening Public Finance Management through a CPIMA, supported by the IMF, to boost capital expenditure efficiency. Anticipated results include the cabinet’s adoption of the CPIMA and PIMA action plan in summer 2023, aligning with the 2023 structural benchmark.
Additionally, the government will prioritize resilient policies, particularly in social protection, rebuilding more resilient infrastructure damaged during recent floods through the 4RF framework, and implementing the updated 2015 National Flood Protection Plan.
The National Strategy
The National Climate Finance Strategy, a linchpin in Pakistan’s Paris Agreement commitment, emphasizes leveraging private sector engagement, international climate finance, and carbon markets. Pakistan requires $348 billion between 2023 and 2030 for systemic resilience. The strategy aligns with the National Adaptation Plan and Nationally Determined Contributions, prioritizing climate-smart policies.
Projects under PSDP, PPP, or SIFC will adopt new templates. From 2002 to 2020, Pakistan mobilized $2.8 billion in adaptation financing, with a disbursement quota of 60%, compared to the global average of 80%. The IMF urges full integration of climate change in the medium-term agenda, emphasizing domestic reforms and increased international support, including tapping into multi- and bilateral financing and catalyzing private adaptation investment.
