SUMMARY of the article “Implementing Fiscal Strategy,” by Ali Tauqeer Sheikh, published on November 16, 2023
The federal government in Pakistan has taken a significant step by introducing the National Climate Finance Strategy (NCFS), addressing a long-overlooked aspect of national policymaking. This strategy aims to integrate climate change considerations into policymaking, raising ambitions for climate resilience. Aligned with the ongoing Stand-by Arrangement with the IMF, one of the objectives is to reduce economic costs associated with climate disasters. The World Bank and IMF have emphasized the importance of aligning national investments with Climate-Public Investment Management Assessment (C-PIMA) to ensure future climate and development financing. To achieve this, the government plans to present C-PMIA to the cabinet, signaling a commitment to climate-resilient investments. The implementation involves key institutions like the Special Investment Facilitation Council, Public Sector Development Plans, and Public Private Partnership Authority. A Sustainable Finance Bureau is expected to reorient a portion of the new PSDP schemes during FY 2023-24. The NCFS is crucial for accessing concessional finances and meeting targets in the National Adaptation Plan (NAP) and Nationally Determined Contributions (NDCs) under the Paris Agreement. The government also plans to invest in resilience through frameworks like 4RF and updated 4th NFPP. However, the article highlights the need for more detailed sectoral priorities derived from the National Climate Change Policy and NAP.
Easy/Short SUMMARY:
Pakistan’s federal government has introduced the National Climate Finance Strategy (NCFS), focusing on integrating climate change into national policymaking. Aligned with the IMF Stand-by Arrangement, the strategy aims to reduce economic costs associated with climate disasters and secure concessional finances. Key institutions like the Sustainable Finance Bureau and Special Investment Facilitation Council will play roles in reorienting projects for climate resilience. The government’s commitment to presenting C-PMIA reflects its dedication to climate-resilient investments. However, detailed sectoral priorities from the National Climate Change Policy are essential for successful implementation.
SOLUTIONS of The Problem:
Whole-of-Government Approach
Implement a ‘whole-of-government’ approach to synchronize the fiscal strategy’s implementation across planning, coordination, projects, budgeting, and portfolio management, breaking down silos within ministries.
Dedicated Secretariat for NCFS
Establish a dedicated secretariat for the National Climate Finance Strategy (NCFS) to oversee its realization, ensuring effective climate governance and diplomacy.
Detailed Sectoral Priorities
Develop detailed sectoral priorities derived from the National Climate Change Policy and National Adaptation Plan (NAP) to provide a comprehensive framework for climate-resilient investments.
Convening Power
Exercise convening power to facilitate inter-ministerial and multisectoral collaboration, essential for the ‘whole-of-government’ approach required by the NCFS.
Brass-Tracking Implementation
Implement brass-tracking strategies on multiple fronts, including getting the Sustainable Finance Bureau off the ground, notifying templates for climate-smart PSDP projects, initiating expenditure tracking, and establishing an ecosystem for carbon trading.
IMPORTANT Facts and Figures Given in the article:
- The ongoing $3 billion Stand-by Arrangement with the IMF aims to build resilience to climate disasters, reducing economic costs for the economy.
- The National Climate Finance Strategy (NCFS) is expected to create fiscal space and reorient portfolios for climate finance, securing carbon credits and accreditation with global climate funds.
- The process includes a new Sustainable Finance Bureau reorienting 20% of the new Public Sector Development Plans (PSDP) schemes during FY 2023-24, amounting to Rs925bn.
- The government commits to presenting Climate-Public Investment Management Assessment (C-PIMA) to the cabinet, focusing on climate-resilient future investments.
- The NCFS involves key institutions like the Special Investment Facilitation Council (SIFC), PSDP, and the Public Private Partnership Authority (3PA).
- Sectoral priorities for climate-resilient investments will be derived from the National Climate Change Policy and National Adaptation Plan (NAP).
- The fiscal strategy aims to access concessional finances and leverage private sector investments.
MCQs from the Article:
- What is one of the objectives of the ongoing $3 billion Stand-by Arrangement with the IMF?
A. Infrastructure development
B. Building resilience to climate disasters
C. Poverty alleviation
D. Technological innovation -
Which institution is expected to reorient 20% of new PSDP schemes during FY 2023-24 for climate finance?
A. Sustainable Finance Bureau
B. National Climate Finance Strategy
C. Public Private Partnership Authority
D. Special Investment Facilitation Council -
What does C-PMIA stand for in the context of the article?
A. Climate-Private Investment Assessment
B. Carbon-Project Management and Implementation Assessment
C. Comprehensive-Public Investment Management Appraisal
D. Climate-Public Investment Management Assessment -
What will be the role of the Sustainable Finance Bureau (SFB) in the implementation of the NCFS?
A. Managing global climate funds
B. Reorienting PSDP schemes for climate finance
C. Overseeing cabinet approvals
D. Developing sectoral priorities -
What is the purpose of the National Adaptation Plan (NAP) and Nationally Determined Contributions (NDCs) under the Paris Agreement?
A. Accessing concessional finances
B. Climate diplomacy
C. Meeting sovereign commitments
D. Securing carbon credits
VOCABULARY:
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Rectified (verb) (درست کرنا): Corrected or made right.
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Ambition (noun) (عظیم خواہش): A strong desire to do or achieve something, typically requiring determination and hard work.
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Reorient (verb) (رہنمائی تبدیل کرنا): Change the focus or direction of.
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Concessional (adjective) (مہرانہ): Relating to or involving the concession of privileges, resources, or rights, especially by a government.
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Accreditation (noun) (تصدیق): The action or process of officially recognizing someone as having a particular status or being qualified to perform a particular activity.
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Resilience (noun) (مضبوطی): The ability of a substance or object to spring back into shape; elasticity.
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Cobbled (verb) (آہستہ آہستہ بنانا): Put together roughly or clumsily.
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Reformation (noun) (اصلاح): The action or process of making changes to something, especially an institution or practice, in order to improve it.
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Mayhem (noun) (ہرج و مرج): Violent or damaging disorder; chaos.
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Synchronize (verb) (ہم آہنگ): Cause to occur or operate at the same time or rate.
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Tick the Right Boxes (phrase) (ٹھیک چی
زیں منتخب کرنا): Fulfill all the necessary criteria or requirements.
- Embedding (verb) (داخل کرنا): Fix (an object) firmly and deeply in a surrounding mass.
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Lacunae (noun) (کمی): An unfilled space or gap; a missing portion in a book or manuscript.
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Trespassing Silos (phrase) (سائلو میں دخل نہ کرنا): Encouraging collaboration and breaking down barriers between separate departments or groups.
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Dedicated Secretariat (phrase) (مختص سیکرٹیریٹ): A specialized administrative office assigned to oversee a particular area or initiative.
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Convening Power (noun) (ملاقات کی طاقت): The ability to bring people or parties together for a meeting or discussion.
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Discipline (noun) (ضبط): The practice of training people to obey rules or a code of behaviour.
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Resilient Recovery (phrase) (مضبوط بحرانی): A robust approach to recovering from crises or disasters.
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Sovereign Commitments (phrase) (سلطانی التزامات): Pledges or promises made by a country as a sovereign entity.
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Carbon Trading Policy (phrase) (کاربن ٹریڈنگ پالیسی): A set of rules or guidelines governing the exchange of carbon credits.
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Implementing fiscal strategy
by Ali Tauqeer Sheikh
THE federal government has rectified what successive governments in Pakistan had overlooked for many years: announcing a National Climate Finance Strategy to help mainstream climate change in national policymaking processes.
The NCFS has raised the bar of Pakistan’s ambition and committed to reorient the portfolios of key national institutions for climate finance, enable innovative instruments, secure carbon credits and accreditation with global climate funds.
Building resilience to climate disasters for reducing economic costs for the economy is one of four objectives of the ongoing $3 billion Stand-by Arrangement with the IMF. The NCFS is expected to create some badly needed fiscal space while building resilience.
The World Bank and IMF had earlier indicated that development and climate financing may not flow to Pakistan in future unless national investments were aligned with Climate-Public Investment Management Assessment. The C-PIMA is derived from the IMF’s time-tested PMIA used as a yardstick or conditionality for disbursements. This will hopefully help the government identify potential improvements in public investment institutions and processes to build a low-carbon and climate-resilient economy.
Pakistan has just committed to IMF that C-PMIA will be presented to the cabinet for approval and that Pakistan’s future investments will be climate resilient. The process will begin with three key institutions: Special Investment Facilitation Council (SIFC), Public Sector Development Plans (PSDP), and Public Private Partnership Authority (3PA), all housed and managed by the Planning Commission. CPEC was not mentioned in the blueprint.
The C-PMIA will be accomplished through a newly minted Sustainable Finance Bureau, again at the Planning Commission, to ‘revolutionise’ climate finance. It is expected that the SFB will reorient 20 per cent of the new PSDP schemes during FY 2023-24, amounting to Rs925bn.
These projects will qualify Pakistan, it is hoped, for concessional finances and help it meet targets set in the National Adaptation Plan (NAP) and the Nationally Determined Contributions (NDCs). Both NAP and NDCs reflect Pakistan’s sovereign commitments, as part of the Paris Agreement, submitted to the secretariat of the climate change convention.
Has Pakistan revised its construction standards to reduce climate risks and costs?
The government plans to invest in resilience though 4RF (Resilient Recovery, Rehabilitation, and Reconstruction Framework that was developed after the 2022 floods), recently updated 4th NFPP (National Flood Protection Plan), and by developing sectoral priorities.
The blueprint of NCFS has not furnished details, but the sectoral priorities will be derived from the National Climate Change Policy and NAP. These will presumably be developed by the sectoral ministries and departments.
In order to meet the IMF conditionalities, the policymakers have packaged many ongoing endeavours and cobbled them together to meet the IMF demands. If successful, it will reflect the ‘whole-of-government’ approach that is mentioned in several national and provincial policies but seldom translated into action. The progress on NCFS will be reviewed early next year under five heads already given in the C-PIMA: climate-smart planning, inter-ministerial coordination, appraisal and selection of projects, budgeting and portfolio management, and risk management.
While the government has announced its commitment, how will it create synergy to ensure its timebound implementation? The fiscal strategy has committed that all projects will have new templates for project concept notes, and technical feasibility studies across the planning documents to completion certificates.
This will require the Planning Commission to revise PC-I to PC-V in order to ensure that public sector projects also map climate risks and respond to adaptation, mitigation, and their development co-benefits, and the finance ministry to adopt mechanisms to track all its climate-related expenditures.
This necessitates brass-tracking on multiple fronts, particularly: i) getting SFB off the ground, ii) notifying templates for climate-smart PSDP projects, iii) initiating expenditure tracking and, finally, iv) putting in place an entire ecosystem that includes carbon trading policy, carbon inventory and its digitalisation, and the required monitoring and validation systems.
Meaningful progress on these will serve as precursors for the two urgent objectives of the NCFS: accessing concessional finances and leveraging private sector investments.
Pakistan’s failure to access international climate finance at scale is often attributed to relatively limited technical capacity of the focal ministry. Instead of understanding the deeper reasons, many ministries and provincial departments have begun to set up specialised units to lure climate finance rather than embedding resilience in their sectoral policies and projects.
These lacunae in governance are confusing for everyone, starting from policymakers, multilateral and bilateral development partners and their governments, to private sector investors and citizens. The NCFS will hopefully bring some discipline to this mayhem.
Underneath this veneer of macro-level commitments are deep layers of needed structural and institutional reforms. The IMF is a new entrant in Pakistan’s climate change space and it is still in the process of defining its standards and procedures.
By way of example, its term ‘climate-aware infrastructure’ has not been defined and adopted by Pakistan, let alone implementing it on the ground. In the 2022 floods, except for $12,969 million losses incurred in agriculture, the major amount of $30bn losses were infrastructural damages in housing, education, health, roads, transmission lines, and so on. Has Pakistan revised its construction standards to reduce climate risks and costs?
The IMF can take comfort in setting the direction for Pakistan’s long journey towards resilience and tick the right boxes to enable the release of the second tranche early next year. Alternatively, the interim government can set a realistic roadmap that balances reform-averse government machinery, urgency of climate action, and the desperate need to build upon the Stand-by Arrangement.
Since the second IMF review in 2024 will cover five interrelated domains (planning, coordination, projects, budgeting and portfolio management, and risk management), it is imperative that finance strategy implementation is synchronised by trespassing silos within which the ministries often operate.
The NCFS is designed as an inter-ministerial and multisectoral document that would, out of necessity, require ‘whole-of-government’ approach, and that is not possible without exercising convening power.
After all, climate finance is a function of climate governance and climate diplomacy at COP28. Both will need to work in tandem and to leverage one to maximise the other. This will require the NCFS to have its own dedicated secretariat to oversee its realisation rather than leaving it to chance.
The writer is an expert on climate change and development.
Published in Dawn, November 16th, 2023