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Foreign debts and role of economic managers

  1. Hurdles in onion exports
  2. Debt servicing getting out of proportion
  3. Pakistan amends agreement with China
  4. Rescheduling of Pakistan's debt
  5. Foreign debts and role of economic managers
  6. Accounting profession and its development in Pakistan

Huge amounts of loans lapsed due to negligence of concerned authorities

From Shamim Ahmed Rivzi, Islamabad
August 16 - 22, 1999

It sounds unbelievable but it is a fact that, while the country is desperately looking for a liberalized inflow of foreign loans and aid, the economic managers have lost millions of dollars. They failed to utilize the amounts, sanctioned by donor agencies, because of sheer inefficiency or lack of proper planning.

According to one estimate, the amount of undisbursed but sanctioned as loans or aid, exceeds over $8 billion. Some of it has been lapsed and lost forever while some of it is still in the pipeline. The latest figure of the lost amount is $243 million which was sanctioned by the Asian Development Bank (ADB) for some projects which Pakistani authorities failed to initiate. A source in the ADB told this correspondent that the cancelled funds would go back to the Bank and would be utilized somewhere else. As far as Pakistan is concerned it has lost this amount. The projects for which these loans were sanctioned and which could not take-off, included, Pat Feeder canal cotton development, flood protection project, Khushab Scarp, Livestock Development, Swabi Scarp, Karachi Sewerage, Second Barani Scheme Sindh Forestry, Flood Relief, Kotri Barrage, Sui Southern Gas Project, Healthcare and third Punjab on-farm project. The unutilized amount included $178.8 million of concessional ADF (Asian Development Fund) and $135 million of the Ordinary Credit Resources (OCR) and pertained to last 3 years.

A recent country programme review, conducted by ADB mission found that project implementation suffered from long delays in preparation and approval of the projects, recruitment of consultants, pre-qualification of contractors and award of contracts. During the review it was noted that the economic sanctions imposed last year, after nuclear test, also caused constraints in respect of project management, funding and procurement.

The cancellation of such a concessional long-term loan of over $243 million is most alarming in the context of prevailing difficult position on the external assistance front. The Finance Minister and his deputies are running from pillar to post for the release of $280 million from IMF. The inefficiency and lack of interest in their work on the part of some government functionaries, the country has been deprived of utilizing development loans. In the past, too many of the sanctioned amount could not be utilized for various reasons and according to some press reports the undisbursed but sanctioned foreign loans for Pakistan were as high as over $8 billion. People responsible for such lapses should have been taken to the task. This seems to be the lack of accountability that no one has ever been punished for such serious negligence.

It is quite understandable that the international financing agencies,, like the Asian Development Bank, do not allow indefinite allocation of lines of credit to any particular country for an unreasonably long period after the sanction of the loan and require implementation of the projects within a time frame. These agencies have to respond to long requests from a number of member countries and therefore they cannot leave the sanctioned loans to specific countries unutilized for an indefinite period. Thus, the loans to Pakistan recently cancelled by the ADB, would be naturally channelled to other member countries.

It is well known that the project loans from the ADB and the World Bank almost entirely cover the public sector development programmes of the federal and provincial governments. This factor pre-supposes raising of counterpart rupee funds by the federal and provincial governments to meet the rupee cost of the project. It may be pointed out here that the budgetary resources have been generally found to be inadequate to allow the government at the centre and the provinces to meet the rupee cost of a large number of projects with the result that over 60 per cent of the development programme is generally carried forward the next year by the provincial government. The situation in this respect is no better with the federal government which has also been resorting to substantial cuts in both development and non-development expenditure over the last three years with a view to maintaining a restraint on its bank borrowings. Under these circumstances non-utilization of project-related foreign loans has become a common feature in Pakistan. In view of our heavy dependence on borrowed money we must evolve a foolproof method to ensure that long-term soft loan sanctioned by the international donor agencies are fully utilized well in time.