The government has requested the World Bank for restructuring the Punjab Cities Program (PCP) worth $200 million while seeking 18 months extension in the closing date.
The restructuring is proposed to extend the closing date of the credit as per the Economic Affairs Division request letter dated January 3, 2023.
The program design remains relevant, despite the challenges and resultant delays encountered so far. PCP can achieve its Program Development Objective (PDO) subject to a time extension, dedicated leadership, focused attention on resolving bottlenecks, and strict adherence to the timelines agreed upon by Punjab Municipal Development Funds Company (PMDFC) and the government of Punjab during the Mid-Term Review (MTR).
The extended time will ensure the achievement of all Disbursement-Linked Result (DLRs); disbursement of all Program-for Results (PforR) funds, embedding the processes and systems in the MCs for long-term benefits; and ensuring the sustainability of the results achieved through oversight mechanisms established in Local Government and Community Development Department (LG&CDD) and Finance Department (FD).
PDO was to strengthen the performance of participating urban local governments in urban management and service delivery. The government has proposed to extend the closing date of the Credit for the Program by eighteen months, from the current closing date of September 30, 2023, to March 31, 2025. No other changes are proposed. This is the first extension of the closing date for the Program Credit.
The IDA Credit of $200 million for PCP was approved on May 25, 2018, and was declared effective on May 29, 2018, with the current closing date of the Credit being September 30, 2023. The Credit finances a hybrid of Investment Project Financing (IPF) and Program-for-Results (PforR) instruments.
The PforR window of $180 million provides Performance-Based Grants (PBGs) based on the achievement of two Disbursement Linked Indicators to the participating Municipal Committees (MCs, urban local governments) for the sustainable delivery of infrastructure and services.
The IPF window of $20 million finances a range of institutional strengthening and capacity development interventions at the MC and provincial government levels, as well as supports the Annual Performance Assessments (APAs) to verify the achievement of results against laid down verification protocols.
At the time of the MTR in December 2022, the likelihood of achieving the PDO was rated Satisfactory, while Implementation Progress was rated Moderately Satisfactory.
Program implementation was substantially delayed at the outset because of the 18-month delay in obtaining internal Government approvals for the IPF Window. Despite this, the Program achieved Disbursement-Linked Results (DLRs) for three successive years. In the fiscal year 2021, PCP exceeded the projected results and received a higher-than-anticipated disbursement from the Credit.
During the fiscal year 2022, progress slowed due to several challenges at the MCs, PMDFC, and provincial levels. The May–June 2022 Annual Performance Assessment (APA) found that the Minimum Access Conditions (MACs, DLI-1), which had been achieved in the first year, were no longer met. In addition, none of the MCs were able to get the requisite score of 60 percent against the Performance Measures (PMs, DLI-2).
While $106.10 million of the PforR funds have been disbursed, only $16.45 million has been utilized by the MCs and approximately $22 million has been committed.
Under the IPF Window, $5.85 million has been disbursed, while $4.17 million has been spent. Support available for the MCs and PMDFC is being utilized, but most of the technical assistance initiatives available for the Local Government and Community Development Department (LG&CDD) and the Local Government Board (LGB) have not yet commenced due to frequent changes in the LG&CDD leadership.
