World Bank approves $150 million loan for Punjab to improve state’s finances, service delivery

20 September, 2022 | Vaishali Sharma

World Bank Headlines

The World Bank’s Executive Directors authorised a USD 150 million loan to the Indian state of Punjab today to help the state better manage its financial resources and increase access to publi...

The World Bank’s Executive Directors authorised a USD 150 million loan to the Indian state of Punjab today to help the state better manage its financial resources and increase access to public services.

In a statement, the IMF said it will assist the state’s efforts to develop the institutional capacity of various government ministries, manage budgetary risks, and make informed policy decisions to ensure long-term growth.

“Punjab’s growth has been below potential. A combination of fiscal challenges and institutional capacity constraints means that scarce resources are spread thin across development priorities,” the statement added.

The new projects will support the state’s development goals by strengthening the planning, budgeting and monitoring functions, and leveraging digital technology, besides increasing accountability in the public procurement systems by supporting the state-wide implementation of new legal and policy reforms.

“The World Bank is pleased to be a partner of the state of Punjab in the state’s effort to deliver timely, cost-effective and good-quality public services, which is critical for inclusive development,” Auguste Tano Kouame, the World Bank’s Country Director in India, was quoted in the statement.

“This new project will support the implementation of the state’s new data policy, which aims to bring together various social protection initiatives and reduce potential leakages while delivering essential services,” Kouame added.

The project will test two initiatives: it will implement a performance-based awards system to motivate municipal corporations to enhance service delivery, and it will test a performance-based grants system.

Second, it will showcase the provision of 24-hour water supply in chosen parts of Amritsar and Ludhiana. It will enhance water delivery systems and cut down on leaks. The success of these pilots is projected to provide a considerable opportunity for statewide scale-up of better service delivery.

“The project is using a ‘whole-of-government’ approach which will ensure that various departments in the Punjab state government are linked so as to enhance their efficiency in managing public resources. Performance linked inter-governmental fiscal transfers will incentivize improved management of cities and service delivery to citizens,” said Dhruv Sharma and Bhavna Bhatia, World Bank Task Team Leaders of the project.

The USD 150 million loans have a maturity of 15 years including a grace period of 6 months, the statement added. 

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