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

Washington, September 20

The World Bank’s Board of Executive Directors on Tuesday approved a loan of USD 150 million to the Indian state of Punjab to help the state better manage its financial resources and improve access to public services.

The international financial institution, in a statement, said it would support the state's efforts to strengthen the institutional capabilities of various government departments, manage fiscal risks and make informed policy choices to support sustainable 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 pilot two initiatives: It will introduce a performance-based grants system to incentivise municipal corporations to improve service delivery. Second, it will demonstrate the delivery of 24x7 water supply in select areas in the cities of Amritsar and Ludhiana. It will improve water delivery systems and reduce water leakages. The success of these pilots is expected to offer a significant potential for the state-wide scale-up of improved 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 incentivise 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 six months, the statement added.

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