By Ali Imran
ISLAMABAD: The Asian Development Bank signed a $1.2 billion loan agreement with Pakistan, the ADB officials confirmed on Wednesday.
The agreement, which was signed last Friday (December 15), comprises funding for budget financing and projects focused on domestic resource mobilisation, while a total of six projects will work towards making women financially independent.
At least one-third of the funds will be disbursed as budget financing and make way for jammed financing pipelines following a deal with the International Monetary Fund (IMF).
The Economic Affairs Division (EAD) and ADB signed the loan agreements last Friday. An EAD official also confirmed the agreement and highlighted that ADB will allocate $400 million from the total fund for budget support via two different agreements.
Meanwhile, the executive directors’ board of the World Bank also approved $350 million in financing today for the Second Resilient Institutions for Sustainable Economy (RISE-II) Operation to strengthen fiscal management and promote competitiveness for sustained and inclusive economic growth.
Najy Benhassine, the World Bank country director for Pakistan, said Pakistan needs urgent fiscal and structural reforms to restore macroeconomic balance and lay the foundations for sustainable growth.
“RISE-II completes a first phase of tax, energy and business climate reforms geared to raising additional revenues, improve the targeting of expenditures and stimulate competition and investment,” he added.
The operation contributes to better fiscal management by improving fiscal policy coordination, enhancing debt transparency and management, strengthening the taxation of property, and improving the financial viability of the power sector.
The World Bank operation also aims to foster growth and competitiveness by reducing the cost of tax compliance, improving financial sector transparency, encouraging the use of digital payments, and promoting exports by lowering import tariffs.
“Based on the foundations laid through RISE II and parallel support by other IFIs, Pakistan has the opportunity to tackle long-standing structural distortions in its economy after the upcoming general elections. Failing to use this opportunity would risk plunging the country back into stop-and-go economic cycles,” said Derek HC Chen, task team leader of the operation.
Earlier, The Independent Evaluation Department (IED) of the Asian Development Bank (ADB) has rated “Pakistan: Provincial Strategy for Inclusive and Sustainable Urban Growth” project successful and likely sustainable.
The IED in its validation report also stated that the objective of the policy and advisory technical assistance (TA) of $2.4 million was to assist the government of Khyber Pakhtunkhwa in adopting an integrated urban sector development approach that entailed policy reforms, investments, and capacity building in the urban sector.
The TA was extended three times for a total of 33 months. The first two extensions requested in the memos of 26 December 2018 (a 12-month extension) and 17 December 20194 (a 12-month extension) were due to slow processing, delayed consultant recruitment (the first ranked consulting firm declined the contract offer), and difficulty reaching stakeholder consensus in the finalization of TA activities. The third extension memo of 18 December 20205 (a 9-month extension) was due to implementation delays related to COVID-19 impacts.
The original TA budget of $2.40 million was reduced to $2.30 million in a memo of 17 July 20206, and further reduced to $2.24 million in a memo of 20 August 20217 because of the requests for partial TA cancellations under the TASF.
