QUARTERLY UPDATE

APRIL2015

AGR

from the British people

TheMultiDonorTrustFund(MDTF)forAcceleratingGrowthandReforms(MDTF-AGR)isafour-yearfund(December2014-2018)aimedatsupportingtheeconomicreformprogramoftheGovernmentofPakistan(GoP).Itassistskeyfederalandprovincialministriesandagenciesinexpandingandsustaining�iscalspaceandrevenuecollection;liberalizingtradeandeconomicactivities;facilitatingprivateinvestment;improvingthequalityofexpendituresanddebtmanagement;andtacklingotherbindingconstraintsfacingtheeconomy.TheFundsupportsthereformprocessby�illingknowledgegaps;strengtheningthecapacityofinstitutionstodesignandimplementreforms;andbuildingdialogueandconsensus.

TheAdministrativeAgreementbetweentheWorldBankGroup(WBG)andtheDepartmentforInternationalDevelopment(DFID)wassignedonDecember16,2014.DFIDhasinitiallycommittedapproximatelyUS$51.3million(£30million)totheFundandthe�irstinstallmentofUS$4.5million(£3million)wastransferredinJanuary2015.

TheMDTF-AGRhasbeenestablishedwithanImplementationComponentcomprised,initially,offourreformwindows,orchildtrustfunds.ThesechildtrustfundsareBankexecuted.ThisquarterlyreportcoverstheperiodofJanuary-April2015.Theachievementsofeachchildtrustfundaregivenbelow:

OVERVIEW

Multi Donor Trust Fund for Accelerating Growth and Reforms

OnetechnicalassistancemissionconductedinFebruary2015toscopeoutactivitiesforDebtPolicyCoordinationOf�ice(DPCO);thenexttechnicalmissionisscheduledinSeptember2015toscopeoutactivitiesoftheExternalFinance(EF)Wing,MinistryofFinance(MoF).Close collaboration was maintained with the International Monetary Fund (IMF) on federal debt managementstrengthening(aspartoftheIMFprogram)TheDirector-GeneralofDPCOisscheduledtoattenda“DesignatingMedium-TermDebtManagementStrategy”(MTDS)workshopinJune2015.PreparationoftheCreditRiskFramework.

Activitiescarriedoutsofarinclude:

AnalysisofproposedstructureofDPCO,whichistobedevelopedasafullyfunctionalmiddleof�ice.Strengtheningofmiddleof�icefunctionsofDPCO(�inancialandriskmanagement).

Program Development Objective

To support the strengthening of debt management in Pakistan by lling knowledge gaps, strengthening the capacity of key institutions and building dialogue and consensus.

Implementation Performance and Achievements as of April 2015

Debt Management Reforms

Program Management Team Leader: Sadia Rafaqat

US$750,000Allocated Budget:

US$48,140 (6%)Disbursement:

MDTF-AGR APRIL 2015

TechnicalassistancemissiontoscopeoutactivitiesfortheEFwing.Strengtheningof�inancialandmarketrisk.StrengtheningofthecreditriskmanagementcapacityoftheDPCO.TechnicalassistancetotheDPCOfordraftinganupdatedMTDS.FacilitationofstafffromDPCO,EconomicAffairsDivision(EAD)andStateBankofPakistan(SBP)toattendregionaltrainingonDebtSustainabilityAnalysis.Formalapproval/requestfromEADtotheWorldBank(WB)toinitiateworkingfordevelopmentoftheRecipientExecutedTrustFund(RETF).FacilitatingthepreparationofthePlanningCommissionForm1(PC-1)fortheRETFattheDPCO/EAD/EFWing.FinalizingthelistofactivitiestobecarriedoutundertheRETFfortheDPCO,EFWingandEAD.FollowuptechnicalassistancemissiontodiscussandsupportactivitiesundertheProgram.

Activities planned for next six months

MDTF-AGR APRIL 2015

Preparationoftermsofreference(ToR)fortheworkofcreditriskmanagement.Agreementonactivitiestobecarriedoutinthe�irstyearoftheFundwiththeDPCOandtheEFattheMoF.AgreementwiththeDPCOonrevisitingthesecondarylegislationinthemediumterm.

Program Development Objective

To support the Government of Pakistan's energy sector reform program by strengthening the capacity of key institutions to design, implement, monitor, and communicate the reform agenda.

Energy Sector Reforms

Program Management Team Leader: Richard Spencer and Defne Gencer

US$750,000Allocated Budget:

US$27,837.22 (3.8%).Disbursement:

US$60,000 until June 30, and US$400,000 in the next quarter. Projections:

SupporttoPrivatizationCommission(PC):Tosupportpowersectorprivatization,internationalandlocaladvisorshavebeenengagedtoapprisetheGovernmentoflessonsfromrelevantinternationalexperience,provideguidanceonkeysector-level requirements for developing a well-designed privatization roadmap, and facilitate discussions among keystakeholdersthroughconsultationworkshops.Oneconsultationworkshopwasheld,inDecember2014,andanotherisplanned.

Support toMinistryofPetroleumandNaturalResources:Consultantselection forastudyongassectorrestructuringoptionsandroadmapdevelopmenthasbeeninitiated.ArequestforexpressionsofinterestwasissuedinMarch2015andtwointernational�irmswereshortlisted.TheRequestforProposalsdeadlineisMay12,2015.

Communicationsandoutreachforreform:Twoonlinechatsontheenergysectorreformprocesswereorganized.TheWBG-supportedlivechatswerehostedontheWBGPakistanFacebookpage(https://www.facebook.com/WorldBankPakistan).

Implementation Performance and Achievements as of April 2015

MDTF-AGR APRIL 2015

Overallsectorreformsupport:Twoseniorlocalexpertshavebeenengagedtoundertakeanassessmentofsectorreformimplementation.Implementationhasstartedwellandactivitiesarerampingup.Thereisnorecipientexecution.Thereareno�inancialmanagementorprocurementconcerns.

ThenextroundofsupporttothePC,involvingarticulationoftheroleoftheCommissionandtheFinancialAdvisorsinmanaging the anticipated privatization transactions; assistance in de�ining the objectives of sector stakeholders'engagement,aswellastherequiredcontentandtimingoftheirinputs;andsupportindecision-makingprocessesAstudyongassectorrestructuringoptionsandroadmapdevelopmentContinuationofworkoncaptivegeneration,wheelingandprivategrids,engagingwiththefederalgovernmentaswellastheGovernmentofPunjabDevelopment of the Energy Ef�iciency program, and standards and labeling in Punjab by the International FinanceCorporation(IFC)Powersectorreform implementationsupport to theMinistryofWaterandPowerand to theNationalElectricPowerRegulatoryAuthoritywillbegin.

Activities Planned for Next Quarter

MDTF-AGR APRIL 2015

Program Development Objective

To (1) strengthen the capacity of the PC to revive the privatization program and increase private sector participation in the economy; and (2) improve the policy framework and performance management of SOEs to ensure efcient use of scarce scal resources.

State-owned Enterprises (SOEs) & Private Sector Reforms

Program Management Team Leader: Gabi George Afram/Sarwat Aftab

US$750,000Allocated Budget:

US$17,493.28 (2.33%).Disbursement:

US$800,000Projections:

Implementation Performance and Achievements as of April 2015

Twotechnicalassistancemissionshavebeenconductedsofar,the�irstinFebruary2015,forthePC,andthesecondinApril2015,forSOEreformsandCorporateGovernance.CapacityEnhancementofPCAPowerSectorPrivatizationRoundtable/BrainstormingSessionwasconductedinDecember2014A 'business plan' for developing the information and communication technology (ICT) infrastructure at the PC wasdevelopedinMarch2015andhasbeensubmittedtothePCforfeedback.TheplanprovidesaroadmapandbudgetforanICTsystemthatoffersretrievabledatastorage,transactiontracking,availabilityoftimelyinformation,auser-friendlywebsite,andamovetowardsapaperlessworkingenvironmentAsenioradvisorwashiredinApril2015tosupporttheseniormanagementofPCinpolicydevelopmentandstrategicplanning; shareknowledgeon internationalbestpractices;provide strategic transactional expertise; overseeworkoftransactionmanagers,etc.AnassetvaluationexpertwashiredforPCtoassisttheCommission'stransactionteams.TheIFCwasengagedwiththePCinprovidingtransactionadvisoryfortwopowerdistributioncompanies(DISCOs)ADonorCoordinationMeetingwasheldonFebruary5,2015;thenextmeetingisscheduledinthecomingweeks.

MDTF-AGR APRIL 2015

SOEReforms

ActivitiestobecarriedouttosupportSOEreformswereidenti�iedafteraconsultationwiththeMoFandtheSecuritiesandExchangeCommissionofPakistan(SECP).Theseincludetrainingandcerti�icationofboardsofdirectors(BODs)ofSOEs;preparationofaconceptnoteoninternationalpracticesincompositionofBODs;supporttotheMoFinthedesignofanInvestmentTrackingSystem;andsectoraltrainingsoneffectiveimplementationofCorporateGovernanceRules,amongothers.

CapacityEnhancementofPrivatizationCommission

CapacitybuildingofthePCthroughengagementofanotherSeniorAdvisor,anICTAdvisor,alaw�irm,avaluation�irm,adonorcoordinator,a�inancialanalyst,andotherrequiredhumanresource.IFCtransactionadvisorythroughappointmentoftop-tierFinancialAdvisorstoworkwiththePCtostructure,marketandcloseprivatizationtransactions.Thisstepisaimedatenhancingthecredibilityoftheprivatizationprocessandmaximizingprivatizationproceeds.TheIFCandGovernmenthavesignedanagreementwherebytheIFCcanbeengagedbythePCtoserveastransactionadvisorsonatransaction-by-transactionbasis.InvestorConferenceinWashington,DC.

SOEReforms

DesignofInvestmentTrackingSystemtobeinitiatedforMoFIdenti�icationofSOEsfortraining/certi�icationofBODsandinitiationoftrainingPreparationofconceptpaperonBODnominationinviewofinternationalbestpracticesAssessmentofimplementationandenforcementchallengesoverpastyears,sincetheadoptionofCorporateGovernanceRules

Activities Planned for Next Quarter

MDTF-AGR APRIL 2015

ImprovementofcapacityofSECPtomonitorcompliancewithCorporateGovernanceRulesamongSOEsonthebasisofobservanceofrelevantproceduresandmechanismsOrganizationofaworkshopon“GovernmentPerformanceManagementSystem”incollaborationwiththeEstablishmentDivisiontobuildawarenessandshareinternationalbestpractices.

MDTF-AGR APRIL 2015

Program Development Objective

To increase scal space which translates into quality social expenditure.

Tax and Trade Tariff Reforms

Program Management Team Leader: Raul Felix Junquera Varela/Mohammed Waheed

US$750,000Allocated Budget:

US$23,048Outstanding Commitments:

US$17,493.28 (2.33%) US$192,739,11 (25.70%). The rate of disbursement is around Disbursement:8 percent higher due to a problem with initial allocation of disbursements. The initial code had to be changed and

initial expenses now need to be reposted. This process is about to be completed.

US$800,000Projections:

Implementation Performance and Achievements as of April 2015

Twotechnicalassistancemissionshavebeenconductedsofar,oneinOctober2014andtheotherinMarch2015.ThenextmissionisscheduledforMay2015.Activitiescarriedoutsofarinclude:AfunctionalreviewoftheFederalBoardofRevenue(FBR)PreparationofToRfortaxpolicyanalysisandmarketintelligenceatFBRAssessmentoftheITsystemsofFBRDevelopmentofaroadmapforautomationofFBRcorebusinessprocesses(ITroadmap)WritingofToRforacourseonlegaldraftingskillstobeconductedinJulyWritingofToRforanITdiagnosticandanITMasterPlanInitiationofastudyofcapitalgainstax(expectedtobe�inalizedinend-July2015)InitiationofastudyofprosandconsofamodernvalueaddedtaxinPakistan(expectedtobe�inalizedinend-June2015)Exchangeofgoodpracticesthroughparticipationofof�icialsofFBRintheOrganisationforEconomicCo-operationand

MDTF-AGR APRIL 2015

DevelopmentGlobalForumonTaxTransparencyProcessmappingandbusinessprocessreengineeringoftaxpayerregistryandrevenuecollectionprocessesatFBR(tobe�inalizedaroundend-May)Attheprovinciallevel,draftingofaRevenueMobilizationStrategyforPunjab(tobe�inalizedinMay2015)DraftingofToRforataxpolicyreformunitintheof�iceoftheSecretaryofFinance,Punjab;PreparationsforaRegionalEventontaxdecentralizationthatwilltakeplaceinAugust/SeptemberProposedvisitbyaSindhRevenueBoardof�icialtoIndiatoexaminethecountry'ssalestaxprocesses.(Thevisit,tobeconductedinMay,isaimedatfacilitatingSouth-Southcollaboration.)

Activities Planned for Next Quarter

CompletionofthefunctionalreviewofFBRincludingahumanresource(HR)assessmentandamoredetailedanalysisofcorebusinessprocessesbasedonaprocessmappingexerciseCompletionofITdiagnosticandinitiationofITMasterPlanProvisionoftrainingintaxaudittechniquesSupportindraftingofataxauditmanualStudyonSingle-StageSalesTaxforPunjabApprovaloftheorganizationalstructureoftaxpolicyanalysisunitsatFBR,includingprovisionofrequiredstaffRe-draftingofCustomsLawSupporttoaconceptnoteforestablishmentofaDataCenter.

MDTF-AGR APRIL 2015

MDTF-AGR Secretariat 7th Floor Serena Business Complex Sector G-5/1. Khayaban-e-SuhrawardyIslamabad,

AGR