ISLAMABAD: The Asian Development Bank (ADB) is likely to clear three loans worth $470 million on June 24, which may ease Pakistan’s financial constraints and reduce the need for excessive borrowing from the central bank.
An official of the Economic Affairs Division said the executive board of the ADB will meet on June 24 in Manila, the Philippines, to consider Pakistan’s request for three programme loans, which will be used to finance budget deficit.
The official said the ADB’s last condition for the Sindh government to constitute two agriculture market committees will be met, after Chief Minister Syed Qaim Ali Shah conveyed to the bank that he will soon set up the committees.
This is attached to the second tranche of $120 million under the Sindh Growth and Rural Revitalisation Programme. Total cost of the programme is $243 million and the donor agency has already provided $100 million. The remaining amount will be released in 2012.
An EAD spokesperson confirmed that the ADB executive board will take up Pakistan’s request on June 24.
This fiscal, the government received just over one-thirds of what it expected to get from the Friends of Democratic Pakistan forum. Compared to commitments of $2.5 billion, it got about $700 million. Besides, the ADB and World Bank also stopped releasing key funds because of the government’s failure to meet certain conditions.
Etisalat International, which has 26 per cent shares in the Pakistan Telecommunication Company Ltd, also did not pay $800 million worth of installments for the PTCL stake. All these led to a $1.5 billion financing gap.
According to a foreign diplomat, the government could not submit proposals for project financing on time, which put off grants and loans.
A finance ministry official said keeping in mind the projected gap in external financing, the government has taken an expensive short-term loan of 200 million dollar from the Islamic Development Bank.
On top of that, the authorities also sold Rs122 billion of treasury bills in the market, exceeding the auction target by Rs32 billion.
The ADB may also approve a second tranche of $150 million for the Punjab Millennium Development Goals programme. The first tranche of $100 million was released in 2007 and the last tranche of the same amount will come in 2012.
A third loan of $200 million for the Public-Private Partnership Programme will also be on the ADB agenda.
However, the official said talks for a $450 million third tranche of the Accelerated Economic Transformation Programme had remained suspended and the EAD on Friday wrote a letter to the finance ministry to address ADB’s concerns for resuming the deliberations.
The ADB has set three conditions for this loan. First, Pakistan must provide a plan for addressing the circular debt issue, second, it has to give solid commitments for budget allocation for projects of the National Highway Authority for next two years and third, it must return the unutilised money taken for six projects.
The official said a $200 million loan for second-generation reforms in capital markets has again been delayed because of two unmet conditions.
The donor has called for preparing a draft law for governing non-bank financial institutions and collective investment companies and a draft bill of securities law for approval of parliament. Owing to a failure to meet these terms, the loan agreement will not be signed in June, the official said.
Published in The Express Tribune, June 19th, 2010.
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