The World Bank reveals details about a massive financial fraud in Pakistan

Pakistan is experiencing a severe economic crisis, where financial frauds have been revealed on a big scale. The World Bank has made this information public after it discovered a scam of 23 Pakistani firms that were corrupt, fraudulent, conspiring, and forcibly adopted to gain contracts for projects begun by Distribution Companies (DISCOS) and National Transmission and Despatch Company (NTDC), according to the report.

IBRD signed a credit agreement with Pakistan in 2008

These enterprises had structured themselves into "cartels" for mutual gain, according to a report issued by the World Bank Group's (WBG) Integrity Vice Presidency (INT). In July 2008, the World Bank's International Bank for Reconstruction and Development (IBRD) and the Government of Pakistan signed a credit agreement for the Electricity Distribution and Transmission Improvement Project.

The project intends to increase the capacity of Pakistan's distribution and transmission networks to meet rising electricity demand in targeted areas, as well as boost the institutional capacity of specific distribution businesses and support other key aspects of the power sector reform. Two International Development Association (IDA) credits were used to fund the project.

The focus point of INT's administrative investigation was the six Project-financed contracts to supply electrical transmission equipment. The research indicated that a group of corporations referred to as members of the cartel controlled the public procurement market in Pakistan for specific types of electrical transmission equipment for years.

Companies manipulated the market in advance

These firms rigged the market ahead of time to ensure that just a few chosen firms, notably those backed by the World Bank, were awarded contracts. As a result, the corporations coordinated on bid prices. Scams involving money are frequent in Pakistan. 

The foregoing revelations clearly warrant immediate scrutiny of Pak businesses that have signed financial agreements with international funding organisations. Financial frauds not only result in significant losses for the country's exchequer, but they also defeat the entire purpose of international funding, which is to promote overall and equitable development. Despite the World Bank's administrative sanction of debarring any legal entity that these corporations directly or indirectly control, it should be cautious in sanctioning any future funding of projects in Pakistan.

(With inputs from ANI)