Karachi Neighborhood Improvement Project Likely to be Restructured

The $86 million Karachi Neighborhood Improvement Project (KNIP) is likely to be restructured for the third time by extending the deadline to June 2023, according to official documents of the World Bank.

The proposed extension of the credit closing date by seven months (to June 30, 2023) will provide sufficient time for the completion of the remaining activities of Component 1, in particular Phase 2 and emergency works. A time-bound implementation plan prepared by the project agencies to complete the remaining project activities is acceptable to the bank.

An IDA Credit of SDR 62.8 million ($86 million equivalent) for the KNIP was approved on June 15, 2017, and was declared effective on October 13, 2017. The closing date of the Credit is November 30, 2022. The Project Development Objective (PDO) is to enhance public spaces in targeted neighborhoods of Karachi and improve the city’s capacity to provide selected administrative services.

As of October 25, 2022, $64.7 million (76 percent) was disbursed from the Credit, and $81 million of project funds have been either utilized or committed. This is the second restructuring for this project; the first restructuring on July 29, 2021, extended the loan closing date from November 30, 2021, to November 30, 2022. The likelihood of KNIP achieving the PDO is currently rated as Satisfactory, while the overall Implementation Progress (IP) is rated as Moderately Satisfactory.

KNIP is set to exceed its original targets and reach an estimated 3.6 million beneficiaries (against the target of 990,000) and cover an estimated 170 hectares (against the target of 75 hectares) once these works are completed. The project is in compliance with loan covenants as well as bank fiduciary requirements. There are no overdue audit reports, and there are no significant unresolved observations made by the auditors.

The implementation status of the three project components is summarised below.

Component 1: Public Space and Mobility Improvements in Selected Neighborhoods ($70 million).

Civil works under this component were divided into two phases. Phase 1 works, which involved the improvement of public spaces in the Saddar, Malir, and Korangi neighborhoods, were completed in December 2020. An estimated 362,000 residents (over 36 percent of the total project target) are benefiting from these improved public spaces. Phase 2 works ($24.6 million) are ongoing and will require an additional four to six months for completion. Implementation progress was delayed due to the abnormal monsoon rains in July/August 2022. As per the latest workplan, all ongoing Phase 2 works can be completed by May 2022, if the loan closing date is extended.

In response to the economic impact of the Covid-19 pandemic and the damage caused by the monsoon rains, $20 million of Credit funds originally allocated to Component 1 were repurposed for labor-intensive emergency works, such as repairs and reconstruction of existing infrastructure. Implementation of two $11.6 million emergency works packages is ongoing and will require an additional four to six months for completion.

Component 2: Support to Improved Administrative Services and City Capacity Development ($10 million).

The main area of support under this component was the automation of construction permits and business registration in Karachi. The project supported the design and implementation of the Sindh Provincial Electronic One-Stop Shop (PEOSS) for business licenses and e-licensing by other provincial agencies. With the completion of this activity, the number of days required to register a firm in Karachi has decreased from 18 in 2017 to 16.5 in 2020. The automation of construction permit processes at the Sindh Building Control Authority (SBCA) was completed in June 2022. This component also financed complaints management and resolution and capacity building of SBCA.

Component 3: Support to Implementation and Technical Assistance ($5 million).

A project implementation unit (PIU) has been established under the GoS Planning & Development Department (P&D). Training activities have been conducted to enhance the capacity of the PIU and other implementing entities in key skills needed to manage the project, inter alia, stakeholder consultation and participatory development, environmental and social safeguards, procurement, and financial management.

The PIU provided technical and financial support to the preparation of three new World Bank operations in Karachi: Competitive and Livable City of Karachi Project (CLICK, P161402); Karachi Water and Sewerage Services Improvement Project (KWSSIP, P164704); and the Karachi Urban Mobility Project (KUMP, P166732). Savings of $5 million from the credit due to exchange rate changes will be utilized to help improve and operationalize the Operations and Maintenance Plans for all completed civil works.

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