Foreign assistance: EAD grilled over non-utilisation of loans

Exchequer has paid millions of dollars in commitment charges due to failures.

ISLAMABAD:

The Pakistani government seems more efficient in obtaining loans for development projects than implementing them; additionally burdening the nation with millions of dollars in commitment charges paid to international lenders in the process.

The Economic Affairs Division (EAD) tabled a report on loans and grants of $250 million and above, obtained between 1999 and 2012, before the National Assembly’s Special Committee on Foreign and Domestic Loans, in which it was revealed that Pakistan had had to pay $63 million in ‘commitment charges’ on loans extended by foreign donors due to a failure to utilise these funds.

EAD officials informed the panel that international donors had committed loans amounting to $11.77 billion during the period, out of which only $8.37 billion were actually disbursed. The officials said that Pakistan had paid back $913 million out of the total as yet. “Out of the total repayment, the principle amount was $490 million, interest rate charges were $360 million, and an amount of $63 million was paid on account of commitment charges and others,” they stated.

“In some cases, disbursement was higher as compared to the committed amount due to variations in local and foreign currency,” EAD officials said. They said that some donors were also charging an insurance and management fee on their loans.

Pakistan received commitments of $5.242 billion on account of budgetary support/balance payments in the period under review. International lenders were quick to disburse $5.347 billion under this head, to meet rising current expenditures incurred by the civil and defence administration. Other programmes were not as lucky. Pakistan’s energy crisis had earned it commitments of $2.172 billion in financial help, but international lenders have so far disbursed only $39.5 million under this head. Donors had also pledged $256 million for petroleum refineries, but did not disburse anything in this regard.

Parliamentarians were also shocked to learn that donors had pledged $264 million for the agricultural sector – which employs the majority of Pakistan’s population – but that disbursements under this head were nil during the period. $252 million in loans had also been secured for poverty reduction programmes, out of which only $120 million had been disbursed.

An EAD official also said that the Pakistan Electric Power Company (PEPCO)’s utilisation of loans was particularly poor, and that “we have surrendered a loan of $60 million due to its slow utilisation.”

During the hearing, parliamentarians expressed serious reservations over the poor utilisation of loans, which had also resulted in unnecessary expenses to the tune of millions of dollars. They noted that the government was printing currency notes while also dabbling in programme loans to bridge the budget deficit – ultimately putting the masses at a disadvantage. They demanded that all future loans be approved by parliament in order to maintain some sort of check and balance in this regard.

Special Committee Member Rana Tanveer observed that unutilised loans were an unnecessary burden on Pakistanis, and that “we should say no to such loans”. He alleged that donors forced the bureaucracy to initiate different projects in order to ‘waste’ money on consultants and material. He also called for loan approvals to be sought from parliament.

Committee Member Asiya Nasir said that government authorities should explain what output was achieved by which loans. “Why are the benefits from the loans not trickling down to the masses and why was the loan taken if the concerned authorities were not able to utilise it?” she questioned.

Ahsan Iqbal asked “We should see how much these loans have contributed to enhance the productivity of economy,” adding that the government should follow a policy of responsible borrowing and debt management.

The Special Committee also questioned the EAD over a loan worth $400 million given by the Asian Development Bank (ADB) in 2006 for Private Participation Information. “What are the tangible results of this loan and where was it spent?” Iqbal asked.

Published in The Express Tribune, October 5^th, 2012.