ADB disbursements fall 42% short of annual target

The ADB disbursements have fallen short of the total target by over 40 per cent for 2010.


Shahbaz Rana June 28, 2010

The Asian Development Bank (ADB) disbursements have fallen short of the total target by over 40 per cent for the financial year 2010 because of the country’s failure in meeting the conditions of capital market and power sector reforms.

Pakistan received the last loan tranche of $200 million for the Private Partnership in Infrastructure Programme on Monday from the Manila-based donor agency, an official of the Economic Affairs Division (EAD) told The Express Tribune. The $400 million programme was approved in 2007 aimed at attracting private investment in the infrastructure sector.

“The ADB disbursement target could not be achieved due to delay in finalisation of Accelerating Economic Transformation Programme and second generation Capital Market Reforms Programme,” said the official spokesperson of the EAD.

The undisbursed amount on account of these two heads stood at $650 million.

Under a four-year County Partnership Strategy 2009-13, the ADB annually disburses around $1.5 billion. However, due to certain reasons during this fiscal year the disbursement stood at $921 million, 42 per cent less than the target.

Pakistan had estimated to receive over $6 billion external financing this year but would remain short of the target by at least $2 billion; half of it would not come from the Friends of Democratic Pakistan forum. The ill-planning on part of the economic managers has once again opened the doors for State Bank borrowing to bridge the deficit gap.

The ADB has imposed three conditions for $450 million worth third tranche for Accelerating Economic Transformation Programme. It had asked Pakistan to provide a financing plan for addressing the issue of circular debt, give solid commitments for budget allocation for the projects of National Highway Authority (NHA) for the next two years and return the unutilised amount obtained for six projects.

“The donor is concerned that resources constraints may affect its interests in road sectors, thus pushing the authorities to commit three year financing for the NHA”, said the official.

The other undisbursed loan of $200 million was for the second generation reforms in the capital markets. It has been delayed because of non-fulfillment of two main conditions. The donor had imposed the conditions of submission of a draft law for governing non-bank financial companies and collective investment companies and submission of draft bill of securities law for the approval of the Parliament.

According to the ADB documents, under the Private Investment Infrastructure Programme the authorities had estimated to increase private investment to 17.8 per cent of the total size of the economy in 2010 from the level of 12.8 per cent by enabling the environment through legal and institutional basis.

However, the government of Pakistan could not provide the enabling environment to the investors because of security and power crisis. The private investment as percentage of the GDP stood at 10.7 per cent, much less than the programme target, states the Economic Survey of Pakistan.

The investment programme is also designed to attract the private money in the sectors of water, power, roads and railways.

Published in The Express Tribune, June 29th, 2010.

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