ISLAMABAD, May 4: The World Bank has agreed to offer development loans to the provinces directly for which the federal government will stand as guarantor.

The decision was part of the federal government’s initiative to allow the provinces to seek loans from the international donor agencies according to their requirements and repayment capacity.

As a first step, new loans are being negotiated by the World Bank with the Sindh and NWFP governments.

It was said that a $90 million rural development loan for Sindh and a similar loan worth $75 million for the NWFP are being discussed by the World Bank with the provincial authorities.

Sources said the World Bank had made it clear that it would not fund those development projects which were not viable, such as the Social Action Programme.

According to the World Bank, one of the main reasons for Pakistan’s lacklustre record in social development was the low level of public expenditure in social sectors which could now be adequately taken care of by the provinces with the help of direct foreign loans.

Welcoming the decision, the finance ministry officials said it was good that direct responsibility was being given to the provinces to undertake their development works in line with their needs.

The purpose of the initiative was to support the provinces in enhancing their efficiency of services, especially for the poor and women in four distinct areas: elementary education, basic healthcare, family planning, and rural water supply and sanitation.

Federal authorities have been told that the World Bank has agreed to offer direct funding to the provinces but no such loan would be extended to the local governments.

However, the federal government or the provinces could seek loans on behalf of local governments as and when required.