Punjab pleads for foreign loans, but quietly

Punjab government pushes National Economic Council to approve new international borrowing ceilings.

ISLAMABAD:

Contrary to its public position against accepting any new foreign loans, the Punjab government on Saturday pushed the National Economic Council to approve new international borrowing ceilings and complained about delays in the approval of development projects that are funded by international lenders.

Source told The Express Tribune that, during the NEC meeting, the Punjab chief secretary demanded that the council should formulate a policy to determine both domestic and international borrowing limits. Article 167 of the constitution, inserted as part of the 18th Amendment to the

constitution, gives the NEC the authority to set borrowing limits for provincial governments for international borrowing.

Nasir Mahmood Khosa, the Punjab chief secretary, requested Prime Minister Yousaf Raza Gilani to form a committee comprising the four provincial chief secretaries and the four provincial finance secretaries to decide on the matter, the sources added.

Finance Minister Abdul Hafeez Sheikh then responded that the federal government is already discussing the matter with the Punjab government and a decision would be made soon, said sources. The other three provinces, however, reportedly did not support Punjab’s demands, which made desperate calls for support on its position before the NEC meeting.

Another source said that officials within the federal government are cautious about determining borrowing limits for the provinces, noting problems faced by other nations after they allowed their sub-national units to borrow directly from international lenders. They cited the examples of Brazil, Argentina, India, Germany and South Africa.

After the May 2 US raid that killed al Qaeda chief Osama bin Laden in Abbottabad, the Punjab government repeatedly said that it would not accept foreign aid or loans, since doing so would lead to compromises on national security.

However, sources said that the Punjab chief secretary also complained that the Planning Commission was delaying meetings of the Central Development Working Party, a body that clears development projects for approval. Nasir Khosa said that several foreign-funded projects were being delayed as a result of the Planning Commission’s alleged tardiness.

One of the participants at the NEC meeting pointed out that the Punjab chief secretary’s complaints made a mockery of Lahore’s claims that it would refuse foreign aid. A spokesperson for Punjab’s ruling Pakistan Muslim League Nawaz, Senator Pervez Rasheed, was unavailable for comment.

Sources said that the Punjab government would also sign a new $80 million loan agreement with the World Bank in the coming week for the Punjab Education Programme. The Punjab government also quietly secured approval for four new projects funded by the international lenders at the meeting of the NEC executive committee of on May 26.

Among other foreign-funded projects approved at that meeting was the Rs9.2 billion Punjab Irrigation System project which is financed partially by an Rs8.1 billion loan extended by Japan. In addition, the Rs4.1 billion Southern Punjab Agricultural project, which includes a Rs3.4 billion loan from the International Food and Agriculture Department was also approved at Lahore’s request as was the Rs30 billion Lower Bari Duwab project, which includes Rs24 billion in financing from the Asian Development Bank.





Published in The Express Tribune, May 29^th, 2011.