ADB may give $3.6 billion for infrastructure

KARACHI (April 11 2005): The Asian Development Bank (ADB) is considering to offer Pakistan $3.6 billion for 2006-08, mainly focusing on infrastructure development, to help in achieving 8 percent growth rate. The ADB has placed Pakistan in top three countries, with China and India, under its country program mission. The Deputy Country Manager of ADB, Naved Hamid, in an interview with Aaj TV network said this on Saturday.

The ADB has increased its interest-free loan to Pakistan from $300 million to $320 million. It allocated on performance basis. "We placed Pakistan in the countries of 'top category'. Pakistan's performance is excellent. The increase depends on macroeconomics and governance which have improved," he said.

He said the bank has big program in which it lends about $1 billion annually to Pakistan from two windows: Asian Development Fund (ADF), and Ordinary Capital Resource (OCR). "The capacity of Pakistan has increased and conditions have improved; "that is why we offered such program".

He said: "If the government wants to achieve 8 percent growth then it will have to improve existing infrastructure, which needs more investment." He added that the ADB offer in this regard has been made to help improve infrastructure.

"Presently, we are discussing a three-year country mission program for 2006-08 with the federal government and all four provinces, and after being agreed by the governments the final document will be tabled to ADB Board for approval," he added.

The program mainly focuses on investment in infrastructure in four major areas including, water (irrigation), power sector, roads and urban development.

The bank will lend the amount from OCR window which includes $500 million for water (irrigation) in rural area, $900 million for power sector, $600 million for roads, and $400 million for urban development, he said.

Naved Hamid further said that ADB would also provide $330 million for social sector, rural development, small cities development and for improving governance.

The bank will also provide $200 million more for rural development from soft window, commonly known as ADF, he added.

The ADB effort is to lend funds evenly to all four provinces. He said that in last year's program for roads development, the bank provided $150 million to Punjab, $200 million to Sindh and $150 million to Balochistan.

"We counter-balance all provinces through our lending to distribute evenly. On the average, I would say, it's evenly distributed and most of the provinces receive about the same amount," he said, adding that only in Punjab, "we have started a four-year 'Resource Management Program' (RMP), and its first year is about to end. The bank would provide $500 million in RMP."

He said that Sindh lacks ownership and commitment issues as compared with other provinces. "We have issues like success in projects and ownership with commitment with Sindh. The province needs development for the improvement of social indicators,' he said, adding that "we are not a profit organisation; we are a development organisation."

Naved Hamid said that he foresaw that Pakistan's exports would increase in the next two to three years under WTO regime.

He said that there is a general opinion that Pakistan is in five countries which can take advantage from WTO regime, after India and China.

In 2005, the ADB forecast 7 to 8 percent GDP growth on the basis of assumptions like weather patterns. "We expect that weather pattern has changed, if we compare with last seven years, and its would have positive impact on crops of wheat and cotton," he added.

As far as raising interest rate scenario was concerned, Naved said that the idea of increase in interest rates was due to increase in demand, "and we have witnessed that there were 3 to 4 months waiting periods for the supply of automobile." By increasing interest rate, it impacted on inflation but affected production. The delivery period in consumer finance may reduce from four months to one month, he added.

Naved said that ADB is in favour of demutualisation of all three stock exchanges of the country and it should be on fast track. But it is the responsibility of Securities and Exchange Commission of Pakistan (SECP) to carry out such work. It would help in reducing speculative peak, he added.


Copyright Business Recorder, 2005