State unlikely to get development loan from World Bank

It may get aid from WB’s Program-for-Results

Kerala will not get the second tranche of the World Bank’s development policy loan (DPL) of $250 million and the additional $100 million sought by the State for the Rebuild Kerala Initiative (RKI).

Instead, the State stands a good chance to get aid from the WB-developed Program-for-Results (PforR) financing instrument for completing the ongoing flood recovery efforts and to build greater resilience to future shocks.

The unique features of PforR include using a country’s own institutions and processes and linking disbursement of funds directly to the achievement of specific programme results.

After results

Although several States in the country have made use of the PforR since its formation in 2012, Kerala is yet to tap the financing instrument as the funds are disbursed only after achieving the results for the standalone programmes and audit.

For national projects

This is in the wake of the Union government’s policy decision not to make available the $2 billion DPL through tripartite agreement to the States and to use it for national projects in the health and MSME sectors.

Kerala had got DPL of $250 million through a tripartite agreement with the Department of Economic Affairs, Government of India, and World Bank last year.

The DPL, made available to the State for the first time, was provided by the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD).

The aid was made available to the exchequer as budgetary support and the State had the ‘flexibility’ on disbursing the funds for achieving targets set under the RKI for the eight prioritised sectors.

Fresh talks

Confirming the developments, CEO, RKI, Rajesh Kumar Singh told The Hindu that the PforR funding would come in smaller tranches on a quarterly basis and fresh negotiations would be held with the World Bank. The Union government is reported to have no objections to the State seeking PforR.

For the State, the stakeholder departments will have to shoulder more responsibility and ensure transparency as the PforR aid is based on results and it will be provided through a tripartite agreement.

The World Bank aid was sought after the State witnessed severe floods and landslips during June-August 2018 affecting up to 5.4 million people, the one-sixth of the population. A Joint Rapid Damage and Needs Assessment had estimated the recovery needs at ₹25,000 crore or $3.56 billion for priority sectors alone.