ADB'S IMPETUS TO GROWTH

PAKISTAN'S PARTNERSHIP WITH THE LENDER SPANNING OVER DECADES HAS HELPED THE COUNTRY IN ALLEVIATING POVERTY.

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
Mar 14 - 20, 20
11

As Pakistan's leading multilateral development partner, the Asian Development Bank (ADB) has assisted the government of Pakistan in undertaking important economic and governance reforms over the decades, which has contributed to steady economic growth and allowed the country to boost spending on poverty reduction programs.

The alliance between Pakistan and ADB, spanning over four decades now, has helped raise millions of people from grinding poverty. However, the global economic recession that stirred upsurge in prices of food and other commodities worldwide, coupled with an array of domestic challenges, have affected Pakistan's economic outlook negatively.

The government of Pakistan is addressing the immediate challenges to the country's economic stability with the help of financial assistance provided by partners, including an International Monetary Fund-backed stabilization program.

The government has also launched a poverty-targeting social safety net plan under the Benazir Income Support Program to help mitigate the adverse impact of the external shocks on the poor and vulnerable. The medium term, stabilizing macroeconomic fundamentals, addressing the infrastructure deficit, and improving implementation of development projects are the key challenges facing the government of Pakistan.

According to details available made public by the ADB, Pakistan has received more than $20 billion in loans since joining ADB in 1966, with more than $15 billion disbursed as of 31 December 2009. A total of 288 loans were provided through the highly concessional Asian Development Fund window and the Ordinary Capital Resources window, with $188 million provided in grants for more than 300 technical assistance (TA) projects.

ADB continued with its large lending program to Pakistan in 2009 with $1.10 billion disbursement and $942.7 million in newly approved assistance. As of 31 December 2009, the portfolio contained 42 active loans amounting to $4.36 billion, 37 ongoing loans of $3.97 billion, and 3 grants totaling $180 million, with bulk of these supporting development initiatives in energy, social sectors, governance, and transport in the four provinces and at the national level.

ADB is working with the government and the private sector to improve the country's infrastructure, energy security, and basic public services. Aligned with national development objectives, ADB's partnership priorities aim to attract investment, create industries and jobs, and improve the quality of life of citizens.

A new Country Partnership Strategy (CPS) for Pakistan, approved by ADB's Board of Directors in March 2009, aims to support Pakistan's strategic objectives of prosperity and poverty reduction. ADB's support to Pakistan in recent years has helped the government implement its development programs, while contributing to macroeconomic stability and revived economic growth, as well as reduced poverty levels. This support was premised on the three cornerstones of ADB's strategy: sustainable economic growth, inclusive social delivery, and pro-poor governance policies.

ADB support in various sectors is evident in the number of people whose lives have been improved. For instance, between 2004 and 2008, ADB-supported projects helped build or upgrade more than 80,000 classrooms and trained more than 145,000 teachers, benefiting nearly four million students in the country.

ADB assistance resulted in an increase of 1,500 megawatts of power generation capacity and the installation or upgrading of 450 kilometers (km) of transmission lines, which brought electricity to about 1.6 million households. ADB assistance to strengthen the power transmission network is helping to improve the efficiency of the system and will lead to reduced line losses and improve availability of electricity.

In transport, ADB helped build or upgrade nearly 1,000 km of roads and highways, benefiting more than two million people. A multi-tranche financing facility to support the government's flagship National Trade Corridor Highway Investment Program is helping Pakistan improve key sections of the motorways and expressways and cope with the infrastructure deficit in this vital sector.

To overcome the impact of macroeconomic crises and help Pakistan stabilize the economy, as well as to cushion the impact on the poorest through expanding social safety nets, in September 2008, ADB approved the Accelerating Economic Transformation Program (AETP) cluster. Under the two subprograms of AETP, a cumulative assistance of $1 billion has been provided. AETP supports the Benazir Income Support Program, a cash transfer program for the poorest, that covered 1.8 million households and disbursed Rs22 billion ($281 million) in cash transfers in fiscal year (FY) 2009. ADB's assistance under the AETP has helped promote and deepen important reforms in the energy, agriculture, and finance sectors in Pakistan. The financing provided by ADB under the AETP framework and other program and project loans over the past two years is an important part of the overall financing framework and balance of payments support under the IMF's ongoing Stand-By Arrangement for Pakistan.

In water supply and sanitation, ADB programs resulted in 5,900 km of water supply pipes installed or upgraded to bring clean water to more than 161,000 households. And, in finance, nearly 400,000 borrowers started their own business or improving their existing ones. Likewise, to help support social development, ADB provided assistance to improve delivery of social services at the local government levels through a series of devolved social service programs. Support for governance reforms was centered at the provincial levels of government to improve fiscal and financial management and was instrumentalized through resource management programs.

To help bring justice to the poor, the Access to Justice Program, completed in 2008, was designed to achieve greater civil society engagement for improved justice delivery, strengthened public oversight of the police, and the establishment of specialized and independent prosecution services.

ADB provided about $870 million in the form of loans and grants and arranged another $97 million in bilateral grant co-financing for the ADB-funded Pakistan Earthquake Fund to rebuild the (2005) earthquake hit areas of Khyber Pukhtunkhwa Province and Kashmir. Under the Earthquake Emergency Assistance Project, 94 per cent of the targeted destroyed houses have been reconstructed, ensuring peoples' access to shelters.

In addition, ADB placed strong emphasis on strengthening safeguards (social and environment) in Pakistan by providing technical guidance and improved monitoring and resettlement actions which, together, contributed to incremental improvements in safeguard compliance. With the objective to mainstream environment and to improve administration of the environment aspect of ADB-assisted loans and TAs, ADB in 2009, enhanced PRM's capacity with the appointment of an environment specialist.

Despite improved macro fundamentals in FY2009, economic growth continues to be modest. Restoring higher growth will need accelerating implementation of structural reforms resulting in stronger revenue generation, eliminating power shortages, and transformation of the industrial and export sectors. The security environment and continued power crisis continue to weigh down the fiscal situation and is hindering recovery of growth. The fiscal situation needs to be improved to sustain public investment and prevent crowding out private sector.

A key challenge going forward is to further streamline and improve portfolio performance to ensure greater effectiveness of interventions to deliver on targeted development objectives. As Pakistan faces difficult times ahead, ADB assistance is more crucial than ever if hard-won ground in the country's battle against poverty is not to be lost.