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Pakistan remains undecided on cancelling $400mn loan from ADB

With only nine months left in closing of the project, Pakistan has not yet taken a final decision on the cancellation of a $400 million loan, which the Asian Development Bank (ADB) has extended for installation of smart electricity meters, due to divergent views of the concerned ministries.

The Power Division – the executing agency for the advanced metering infrastructure (AMI) scheme, wanted cancellation of the loan. But the Economic Affairs Division (EAD) – the window to deal with the foreign lenders, has sought a review of the decision, said officials in the EAD. The EAD has now sought interventions of the new government to resolve the issue.

The EAD has revived the matter days before a visit of ADB Vice President Wencai Zhang to Pakistan. Zhang would visit Pakistan early next month and revival of the $400 million project is part of his agenda, said the officials.

The EAD wanted to hold a meeting with all stakeholders before the vice president’s visit. It hopes that with the change of administration the Power Division could also review its earlier stance, the officials informed.

The $400 million loan is part of the overall $5 billion package for replacing manual electricity meters with advanced ones in only those power distribution companies where it is economically and financially viable.

The ADB had approved the loan in November 2015 and as of end March this year there was no physical and financial progress on the project, according to the ADB’s documents. Pakistan has been paying commitment charges on the undisbursed amount.

The original closing date of the project is June next year. The $400 million loan is part of the multi finance facility for the power distribution sector. The EAD has expressed concerns that the decision to cancel the loan may also affect future lending to Pakistan’s dilapidated power distribution sector.

The stated objectives of the loan are reducing distribution losses and improving revenue collection, enhancing load control and load management, providing automated consumption data collection of all customers, and modernising the electricity metering and billing system.

ADB’s latest assessment report on the project showed that the Power Division has put on hold the tendering process initiated for installation of meters in Islamabad Electricity Supply Company (Iesco) and Lahore Electricity Supply Company (Lesco). The Iesco had initiated its invitation for bids in July 2017, with bid submission deadline of January 11, 2018 but the tender was cancelled by the Power Division on January 9, this year, it added.

The report stated that the recruitment process has also been put on hold by Power Division for both Iesco and Lesco’s Project Implementation Consultant’s (PIC) contracts.

The ADB is pushing the project on the premise that the pre-paid electricity meters will control the flow of electricity and ensure 100% collection of bills.

Ijaz Khokhar stresses exploring non-conventional markets

Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Chief Coordinator Ijaz Khokhar underlined the need of exploring non-conventional international markets in a bid to boost export volume.

Talking to APP on Thursday, he said that display centres (Pakistan Trade House) should be established in Dubai and Rotterdam to facilitate the domestic exporter community. “A large number of foreign businessmen are visiting Dubai because it has become a major trade and business hub,” he said.

“Setting up the display centres would facilitate the domestic entrepreneurs to settle their business deals with ease as well as help reduce the additional burden of travel cost.”

Khokhar urged the government to split the textile sector into three categories namely raw material, home textile and apparel adding that the sector presently comprises of multiple sub-sectors, all having different functions and activities. The chief coordinator further stated that the value-added garment sector of the textile industry showed a growth of 11.22% in 2017-18. “The value-added garment sector is a major tax payer, largest employment generator and exporter of up to $5.5 billion products,” he added.

Government decides to drop 450 schemes from PSDP

The Pakistan Tehreek-e-Insaf (PTI) government has decided to drop nearly Rs1.6 trillion worth projects from the Public Sector Development Programme (PSDP) with the aim to divert the sacred public funds towards the schemes that are already under implementation.

The government has decided to exclude nearly 450 schemes from fiscal year 2018-19’s PSDP, which will reduce the overall numbers of schemes to close to 850, said officials of the Ministry of Planning.

The cost of about 450 schemes, all of them unapproved but part of the PSDP, is Rs1.6 trillion. The will result into reduction in financing needs of the PSDP by 27% to nearly Rs4.3 trillion, officials added.

Over 60 projects of the National Highway Authority (NHA) with cumulative cost of Rs1 trillion will be removed from the scope of the public financing.

Most of the projects are located in Punjab, which the last Pakistan Muslim League-Nawaz (PML-N) government had included in the PSDP despite the fact that these were provincial roads.

The decision to axe 450 schemes will save Rs45 billion allocations that will be diverted towards the projects that are already under implementation.

During the PML-N tenure size of the PSDP alarmingly swelled to close to 1,280 schemes which now require about Rs5.9 trillion to finish work on them. The sources in the Planning Ministry said the PSDP document used to be finalised while keeping in mind the political requirements of the ruling party.

The bureaucracy of the Planning Ministry also did not play its role to stop the last government from inclusion of politically motivated schemes in the PSDP. The irony is that the same people are advising the new planning minister on the PSDP rationalisation.

The step to cut the PSDP size has been taken as part of the PTI government’s plans to introduce fiscal adjustments aimed at improving the overall macroeconomic situation.

Finance Minister Asad Umar on Tuesday told the National Assembly that the size of the PSDP has been cut to Rs575 billion as against the Rs800 billion approved by the last National Assembly.

With Rs575 billion annual allocations, it will require on an average seven and half years just to complete these ongoing projects. The last government ignored this critical fact, which increased the size and financing needs of the PSDP to a level that is now unsustainable.


In August 2018: current account deficit contracts 72pc due to drop in imports

Pakistan’s current account deficit (CAD), a major source of concern for the past couple of years, surprisingly narrowed down 72% to $600 million in August 2018 compared to the previous month because of a notable drop in imports.

The deficit – which is the outcome of higher expenditures in foreign currencies than the earnings – stood at $2.12 billion in the previous month of July, the State Bank of Pakistan (SBP) reported on Wednesday.

Imports slowed down 19% to $4.47 billion in August compared to $5.49 billion in July.

“The drop in imports (however) indicates an economic slowdown,” economist Ashfaque Hasan Khan said.

A steady growth in export proceeds and worker remittances also extended their due support to the massive drop in the current account deficit, “which seems to be seasonal due to Eidul Azha in August,” said Arif Habib Limited Head of Research Samiullah Tariq.

He said the current trend showed the deficit would come down in fiscal year 2018-19 from the one booked in the previous year. However, it may not remain as low as $600 million in each of the remaining months of the year.

“We have estimated current account deficit for the year (FY19) at $16 billion,” he added.

While presenting the amended Finance Bill 2018 in the National Assembly on Tuesday, Finance Minister Asad Umar said the full year’s current account deficit would widen to $21 billion from last year’s $18 billion, if his government would not take corrective measures through the mini-budget.

Citing the Pakistan Bureau of Statistics’ latest data, Tariq said imports of almost all goods fell notably in terms of both value and volume, except for fuel oil due to the uptrend in crude oil prices in international markets.

“However, the import of oil in terms of volume also dropped notably in August,” he noted.

He said imports may continue to remain moderately low due to a drop in machinery imports for the China-Pakistan Economic Corridor (CPEC).

Previously, Pakistan has seen an exorbitant increase in CPEC-related imports due to purchase of thermal power machinery from abroad. This caused a widening of the current account deficit.

The recent beginning of the second phase of CPEC developments, under which hydel power projects were being constructed, would nominally contribute to the deficit as 70-80% of the cost of projects would be borne in local currency, he said.

The central bank said exports improved 4% to $2.08 billion in August compared to $2 billion in July.

Worker remittances enhanced approximately 6% to $2.03 billion in August compared to $1.93 billion last month.

Also, the foreign direct investment (FDI) improved 26% to $160 million in August compared to $127 million in July.

WB warns Pakistan of rise in Dasu project cost

As Pakistan struggles to generate resources to build dams, the World Bank (WB) has warned that the cost of $4.3-billion Dasu hydroelectric power project may increase and it can face delays due to the country’s inability to resolve disputes over land acquisition.

World Bank Country Director to Pakistan Patchamuthu Illango met Minister for Planning Khusro Bakhtiar on Wednesday, seeking intervention of his office in order to prevent the 2,160-megawatt clean energy project from complete derailment.

Usual bureaucratic inefficiencies and procedural hurdles are at the heart of the problem, according to people engaged in the construction of the project.

The Washington-based lender approved a loan of $588.4 million for the construction of the run-of-the-river project in June 2014. It has also extended a partial credit guarantee of $460 million to pave the way for arranging commercial loans to meet the remaining financing requirements.

Owing to slow physical progress, the World Bank released only $176 million or nearly 30% of its loan component by April this year, according to a project progress report of the lender.

The bank cautioned Pakistani authorities that civil works may not be completed by the June 2021 deadline, sources told.

The project, which is critical for improving the country’s energy mix, faces problems despite the top priority accorded to construction of hydroelectric power schemes by the government and the judiciary.

The military has also recently contributed over Rs1 billion to the Diamer-Bhasha and Mohmand Dam Fund.

However, it seems that no one will be penalised for creating hurdles in the way of completing the foreign-funded Dasu project.

Due to the poor pace of work, the World Bank has kept progress rating of the first phase of the project unchanged at ‘moderately satisfactory’ for the last two years. The project, however, has enjoyed ‘satisfactory’ rating in terms of expanding the hydroelectric power supply in Pakistan.

The latest progress report of the international lender also mentioned that “further expansion of main works is currently being limited by delays in land acquisition for the construction area”.

The June 2018 report added that acquisition of land close to the dam’s site area over the next six months was crucial to not cause cost overrun and delay in project implementation.

The office of Deputy Commissioner Upper Kohistan and Project Management Unit of the Water and Power Development Authority (Wapda) are handling land acquisition for the project.

Despite taking services of the provincial Land Revenue Department, the people concerned have failed to finish paperwork for land acquisition from the locals.

The Executive Committee of National Economic Council had approved land acquisition rates in mid-2015.

The last PML-N government gave preference to the Dasu hydroelectric power project over the Diamer-Bhasha dam. Despite that, Wapda could not take appropriate measures to put the project on fast track.

Last progress review report showed that work on transmission lines of the scheme has been finalised by only 35%. Main civil work is focused on finalising temporary work areas such as camps, batching plant and construction of a bridge across the Indus River.

It is a “high-risk high-reward” project aimed at providing low-cost, non-carbon renewable energy.

The World Bank has now described the overall risk in completion of the project as high.

Illango is said to have raised the issue of delay in approval of project documents by the Planning Commission. Sponsoring ministries and project approval authorities take up to two years in just giving necessary approvals, which also affect business operations of the lender, officials said.

Digitalisation: Pak e-commerce witnesses growth

The number of registered e-commerce merchants in the country has risen more than 2.6 times owing to 3G/4G services and availability of cheaper smartphones and affordable internet packages. Pakistan’s e-commerce market has been experiencing reasonable growth over the past few years. The country has one of the highest rates of mobile and internet penetration in South Asia, with 40 million internet subscribers and 20 million Facebook users. This visible growth has encouraged many retailers to operate their own websites or use online marketplaces to exhibit their products. According to statistics, Pakistan’s total e-commerce sales amounted to just $622 million in 2017.

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