ADB: $500 million loan accord signed for Pak

Saturday June 27, 2009

ISLAMABAD: The government of Pakistan and the Asian Development Bank (ADB) on Friday signed a loan agreement for 'Accelerating Economic Transformation Program (Subprogram-2)' amounting to $500 million, which is second part of a larger program of about $1.5 billion, over a period of four years, to support Pakistan in dealing with the challenges created by the unprecedented international food and energy crisis.

The agreement was signed here in Economic Affairs Division (EAD) by EAD Secretary Farrakh Qayyum from the Pakistan side and Rune Stroem, ADB Country Director in Islamabad. The program will help the Pakistan government to remove fundamental distortions to support economic transformation and strengthen the financial sector.

The principal objectives of the program are: (i) to achieve a sustainable higher economic growth in the medium term, (ii) expand its social safety net and make it more targeted to protect the poor and vulnerable from the adverse impact of the recent global developments, (iii) adopt structural reforms to address inefficiencies in the agriculture sector, particularly with respect to wheat markets and food security policies, and (iv) take measures to address the energy crisis.

Rs 41 billion in the financial year 2008-09 was allocated for safety net cover up to $5 million to poor families. Through Benazir Income Support Program, a cash grant of Rs 2,000 is provided every alternate month to qualifying families based on a means-tested selection criterion using computerised national identity cards (CNICs). The Program is to help to empower women by paying benefits to the female head of the family who is required to have a computerised national identity card.

Formula-based scheme has been established with the introduction of market based pricing system for setting the support price for formers, taking into account the cost of production, regional prices, import export prices, domesting and global market conditions. The price of wheat for flour millers should reflect all related costs. In this way, wheat subsidies will be reduced to the minimum.

The Government has adopted the Power sector circular debt resolution plan which includes (i) confirmation of the amount of overdue debt owed by government and others; (ii) development of a financing plan showing when and how the Government will pay its debt; (iii) tariff adjustment and other measures to prevent reoccurrence of circular debt; (iv) measures that will improve finance, accountability and corporate governance of public sector entities in the power sector; and (v) implementation timetable and monitoring framework.

To strengthen the financial and operational autonomy of the Financial Market Unit (FMU), amendment has been made in the anti money laundering law to improve the financial market governance. To ensure the sustainability of these reforms and promote transparency in the implementation, Government shall provide quarterly progress to the ADB on the status of implementation to promptly and proactively address any implementation issue that may arise.

An action plan is prepared in this regard and first quarterly review mission will be held at the Federal and the Provincial level in the fist week of July 2009. Slow moving projects, which are causing cost to the government, will be reviewed to clean up the portfolio and bring the number of projects to manageable level.

(BRecorder)