ADB ASSISTANCE FOR PAKISTAN

$ one billion will be advanced by the Bank during 2002 for financing the development projects

From SHAMIM AHMED RIZVI
Islamabad
April 15 - 21, 2002

Asian Development Bank (ADB) is expected to offer Pakistan a three-year rolling plan for over US$ 2,500 million in assistance for some 24 new loans/projects during calendar year 2002-2004. A source in the Ministry of Finance told this correspondent that ADB which is fully satisfied with the ongoing economic & financial reforms in Pakistan is coming in a big way to help the country in revival of its economy and its poverty reduction programme. The Bank has finalised "Country Strategy Paper" (CSP) which will be put up before the Bank's Board of Directors for approval by the end of current month. The President of ADB, Mr. Tadao Chino who visited Islamabad last week while returning from Kabul to meet Finance Minister Shaukat Aziz has already indicated that fresh assistance to the tune of $ one billion will be advanced by the Bank during 2002 for financing the development projects in different sectors in Pakistan.

The project aid programme was suspended in 1998 after the country tested nuclear devices and the bank had to resort to short-term country operational framework to keep the aid going. It was basically to assist the country to build up capacity, improve exchange earnings and governance. In 2000 the bank started process for long-term strategy and carried out poverty analysis and project studies with the stakeholders.

The official said that the CSP is a long-term strategy with poverty analysis forming the basis of the programme. Based on the utilisation of funds this year, the lending for next two years can range from $700 million to $1 billion, he said. The ADB has already announced that it will provide funds up to $1 billion in this calendar year.

The Bank's headquarters in Manila, the source said, had already completed its work and proposed almost US$ 2,500 allocations for Pakistan during the next three years. Pakistan is said to be receiving this offer following the recent visit of four-member ADB's Board group led by Chinese Executive Director Zhao. This group visit is normally undertaken once in every five years.

Following Islamabad's special request, Malaysia decided to forego its turn in Pakistan's favour. According to a finance ministry source, Khawaja Zaheer who is representing Pakistan in the ADB, has reportedly played vital role in arranging the visit and then making it favourable for Islamabad. According to sources the ADB's group during its visit gathered its own impressions about Pakistan's capacity as the second largest borrowers of the Bank following Indonesia.

The Board group held several high level meetings with federal and provincial authorities and also visited the three provinces and the federal capital. The visitors also went for on-site project inspections in Rawalpindi, Attock and the FATA as they travelled from one city to the other.

The group was said to be fairly broad based representative group from 30 shareholding interests in North America, Europe, and all regions of Asia. Additionally, its members were quite senior by virtue of their professional standing, experience and functions as they chair three out of the four Board Committees.

Pakistan currently owes some US$ 3.9 billion in OCR and US$ 4.8 billion of ADF loans to ADB. Its annual lending size has also significantly increased in 2001. In 2002 this lending size would be sustained depending on the Board approvals. The ADB has stood by Pakistan even during the era of sanctions. Except for 1998, its normal lending varying between 400-500 million has never been suspended.

ADB had offered Pakistan its development assistance to the tune of $950 million in 2001 from the previous $626 million. The Asian Development Bank runs its assistance programme on calendar year basis. During the year 2000, the ADB however, disbursed US$ 521.3 million to Pakistan. In 1999 the disbursed loan was $472 million while during 1998 when Pakistan exploded its nuclear device and got all sort of sanctions in response from everywhere the ADB was an exception as it disbursed $511.5 million. In 1997 the amount disbursed by the ADB was $395.7 million while during 1996 this figure was $519.2 million.

The projects identified by it for this year lending include $250 million capital market reform, $300 million devolution services programme, Sindh rural development programme $60 million, Punjab rural development programme $50 million, Punjab road sector $150 million, school development $100 million whereas two programmes of $150 million are standby.

That the economic managers of Pakistan have succeeded in regaining the confidence of ADB's management has been repeatedly endorsed at different levels and at different forums. Recently the resident representative of ADB in Pakistan, Mr. Maashuk Ali Shah, in his lecture at NIPA on "an overview on Pakistan economy," said the present government's development agenda provides a good balance between growth and social development. It is giving macroeconomic stabilisation a major priority in the short term. However, during this period progress in poverty reduction and social development will depend largely on more effective use of existing resources. The problems facing Pakistan are enormous and will require concerted government efforts to overcome in the long run. Pakistan needs to focus on economic growth in labour-intensive sectors, employment generation activities and on structural and government reforms for improvement in efficiency and effectiveness of the public and the private sectors, Mr. Shah added.

He said Pakistan needs to enhance revenue mobilisation, contain non-development expenditures and utilise existing resources more efficiently. Poverty reduction, sustainable economic growth and employment generation, human development and improving governance should be key focus, he added.

Talking about the regional problems and standing of Pakistan he said that within the inter-regional context, Pakistan's GDP growth rate on average for 1990-99 at 3.8 per cent remained at the lowest level.

The sectoral average annual per cent growth indicates that Pakistan remained mostly dependent on agriculture, reflecting low skill and technology intensity. In terms of industry, manufacturing and service sectors, it is placed at the bottom. The performance remained lower than it was in the decade of the 1980s. Growth in the industrial sector was high in Bangladesh. Nepal led in manufacturing while India's performance was best in the services sector for the period 1990-99.

In the context of recurrent natural disasters and continuing political instability in some areas, the stability of South Asia's growth is fairly impressive. For instance, drought has persisted in Northern India, Afghanistan, and Pakistan for the last 3 to 4 years. A massive earthquake killed thousands in India. Other more chronic obstacles to growth were poor governance problems and economic distortions. The government had to handle these effectively for the success of economic revival programme introduced in 1999, the ADB resident representative offered.