ADB SUPPORT TO PAKISTAN

Bank believes that Pakistan will achieve or even surpass 5.3 percent growth rate during financial year 2003-04

From SHAMIM AHMED RIZVI, Islamabad
Jan 05 - 11, 2004

The Asian Development Bank (ADB), in its quarterly report on Pakistan's economy, (Pakistan Economic update July-September 2003) has drawn an overall positive picture of country's economy. It has, however, expressed concern in some areas including rising poverty and performance of public sector enterprises like WAPDA and KESC where reforms process is rather slow.

ADB's confidence in Pakistan economic future is also indicated from the fact that it has offered to lend over $ 1 billion in the calendar year 2004 for 8 development projects having its focus on pro-poor growth and reduction of poverty. ADB resident representative told newsmen in Islamabad last week that the country program recently finalized the assistance program for the country for the coming year. In 2003, the lending portfolio was of $ 871 million which has now been raised to $ 1.1 billion.

According to "Pakistan Economic update" ADB believes that Pakistan will achieve or even surpass 5.3 percent growth rate during financial year 2003-04 as the industrial sector has shown exuberant growth in the past few months. "Economic recovery which had started last year continued with both domestic and external sectors remaining buoyant". The private sector credit has grown largely in the industrial area. The existing unutilized capacity is being employed to meet higher demands. The interest rates have bottomed out as has been the case globally.

The report presents an analysis of economic development and trends in Pakistan during the first quarter (July-Sept) of the current fiscal and predicts outlook for the rest of the fiscal year. The report also discusses government economic policies and pace of reforms and reviews poverty-related expenditure. The government pushed forward its economic reform agenda and made further progress in privatization of public sector enterprises. Robust growth in exports as well as high level of remittances point to comfortable balance of payment. The overall fiscal deficit target of four percent is likely to be achieved. Inflation is likely to be contained to four percent. Foreign exchange reserves are rising and overall investment climate is bright, the report concludes.

Having a critical view of pace of reforms in CBR, WAPDA and KESC the report urges the authorities to carry out the reforms program of these public organization more diligently. It also recommends for urgent and meaningful measure to check macro economic imbalances by controlling unemployment and poverty.

The lending policy of the ADB for the year 2004 conforms to this recommendation. The next year lending program consist of two components i.e. firm loans worth $ 800 million and standby loans of $ 300 million bringing the total to $ 1.1 billion.

According to details of the programme for 2004, $ 250 million is earmarked for NWFP Road Development Sector and sub-regional connectivity; $ 40 million for FATA Rural Development; sustainable livelihoods in Barani areas project (Punjab) to get $ 60 million; and decentralization of social services in Punjab $ 150 million.

DETAILS OF LENDING

S.No.

Loans

ADF

OCR

Total

FIRM LOANS

1.

FATA Rural Development Project

40.0

0.0

40.0

2.

Sustainable Livelihoods in Barani Areas Project (Punjab)

30.0

30.0

60.0

3.

Balochistan Resource Management Program

10.0

110.0

120.0

4.

Decentralized Social Services (Punjab)

75.0

75.0

150.0

5.

Restructuring of Technical Education and Vocational Training System

20.0

30.0

50.0

6.

Rawalpindi Environmental Improving Project

40.0

40.0

80.0

7.

NWFP Road Development Sector and Sub-regional Connectivity

5.0

245.0

250.0

8.

Cleaner Fuel Project

2.0

48.0

50.0

STAND-BY LOANS

1.

Agriculture Diversification and Agribusiness Development

5.0

95.0

100.0

2.

Industrial Efficiency and Environmental Improvement Project

5.0

95.0

100.0

3.

Decentralized Social Services Program-II

0.0

100.0

100.0