ADB sets $7.5 billion lending programme for Pakistan

Manila-based lender unveils Country Operation Business Plan for 2019-21

Shahbaz Rana December 14, 2018
Pakistan and the ADB on Thursday signed a loan agreement amounting to $280 million for the Second Power Transmission Enhancement Investment Programme - Tranche-3. PHOTO: FILE

ISLAMABAD: The Asian Development Bank (ADB) has proposed a $7.5-billion lending programme for Pakistan for next three years, allocating one-third of the total for budgetary support to the government.

Pakistan’s largest lender on Thursday unveiled its Country Operation Business Plan for 2019 to 2021, which would cover first three years of the Pakistan Tehreek-e-Insaf (PTI) government. Of the proposed sovereign lending programme of $7.5 billion, over 71% or $5.3 billion will be given on commercial terms. The remaining $2.2 billion will have concessionary interest rates, according to the ADB.

However, against the proposed lending plan of $7.5 billion, the ADB indicated that available resources during the period would be $5.7 billion. The overall lending size is consistent with the last three-year Country Operation Business Plan.

Final loan allocation will depend on available resources, project readiness, project performance and debt distress rating of the country among others, according to the strategy document. The lender has proposed giving $2.4 billion or 32% of the total loans for budgetary support over the next three years.

ADB says Pakistan’s external conditions have worsened in past few months

Subject to overall macroeconomic stability, the policy loans will be given for energy-sector reforms, improving trade and competitiveness and financial market development.

These policy loans will be pegged with conditions like further liberalisation of Pakistan’s economy. The full loan disbursement for budgetary support will also depend on Pakistan’s ability to secure a bailout package from the International Monetary Fund (IMF) at the earliest.

The flow of loans from multilateral lenders disrupted during the past almost two years due to deterioration in economic conditions. Some of the proposed policy loans of the ADB for energy and trade sectors remained undisbursed last year. The ADB said the proposed assistance pipeline for Pakistan may need to be further adjusted, particularly for 2020 and 2021.

Nearly 30% or $2.24 billion in loans have been proposed for the energy sector for the next three years, higher by 22% or $500 million. The pipeline includes a multi-tranche financing facility for the Transmission Strengthening for National Transmission and Despatch Company (NTDC), a hydroelectric power development project of the Water and Power Development Authority (Wapda) and support for the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project.

Pakistan and the ADB on Thursday also signed a loan agreement amounting to $280 million for the Second Power Transmission Enhancement Investment Programme - Tranche-3. Economic Affairs Division Secretary Noor Ahmed inked the loan agreement with ADB Country Director Xiaohong Yang. The ADB has proposed $1.4 billion in loans for the transport sector, which is nearly one-fifth of the total allocation for the next three years. The proposed lending programme for the transport sector is 22% or $400 million less than the previous allocation.

The ADB plans to give loans for the sustainable national highway project and the Sindh Hyderabad Southern Bypass project. It also proposes support for the revitalisation of Pakistan Railways to improve transport sector’s sustainability, including exploring unconventional financing arrangements.

The Manila-based lender has cut its allocation for the agriculture sector by 28% to $794 million. Over one-tenth of the total envelope will go to the agriculture sector.

Pakistan’s economic growth likely to slow down to 4.8%

The pipeline includes the Greater Thal Canal Irrigation project, Kurram Tangi Water Resources project and Smaller Cholistan Water Resources Development project.

Allocation for the water sector has been increased by 180% to $470 million. The pipeline includes a cross-sector project readiness facility for Punjab and the Punjab Cities Improvement project. A major chunk of $2.4 billion or 32% of the total loans has been set aside for finance and public-sector management aimed at providing policy loans. There is an increase of 26% or $500 million in budget financing support for the government.

The ADB has indicated giving loans for the trade and competitiveness programme in 2019, financial market development in 2020, infrastructure financing and public-private partnership in 2021. The ADB has also indicated a loan for the Benazir Income Support Programme, likely to be disbursed in 2020.

In education and health sectors, the ADB has indicated $225 million in financing, which is almost at the previous level. The loans include $175 million for the projects of secondary education in Sindh and improving workforce readiness and skills development in Punjab and $50 million for improving the quality of healthcare services in Khyber-Pakhtunkhwa.

Published in The Express Tribune, December 14th, 2018.

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Shan | 3 years ago | Reply They need to do like the IMF-set terms for utilisation of the loan and its monitoring. Funds would be misused otherwise again.
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