ADB provides $150 million to Pakistan to boost inclusive growth

By Naagesh, N.

Microfinance Focus, Sept. 17, 2009: The Asian Development Bank (ADB) is extending $150 million in loans to Pakistan’s Punjab province, as part of a second phase of support for public policy reforms which are designed to boost inclusive growth and the delivery of services.

The funds for subprogram 2 of the Punjab Government Efficiency Improvement Program include $75 million from ADB’s ordinary capital resources (OCR), and a further $75 million from its concessional Asian Development Fund (ADF). The package seeks to introduce a results-based management for the first time in Pakistan.

Punjab, Pakistan’s largest provincial economy and the most populous province, has seen sharp gains in economic growth and poverty reduction in recent years, said a press release from the ADB. However, economic conditions have worsened since late 2007, exacerbated by chronic power shortages and a host of domestic and international factors. Capacity gaps in public sector management and institutions, along with a lack of investment from the private sector, have constrained the delivery of social services, it added.

The new loans will support reforms that strengthen public financial management through the introduction of output-based budgeting; improve the efficiency and accountability of the civil service; boost the affordability and sustainability of the public pension system; and promote public-private partnerships for infrastructure and social services.

“The adoption of results-based management will transform public sector management from micro control to a greater focus on results and will modernize government operations in Punjab,” said Xiaoqin Fan, Senior Economist for Public Financial Management in ADB’s Central and West Asia Department.

The program also supports the allocation of more resources for gender reforms and capacity building to address current gender inequality in key sectors.

The OCR loan has a 15-year term with a grace period of 3 years, and interest charges set according to ADB’s LIBOR-based lending facility. The ADF loan has a 24-year term with an 8-year grace period carrying an annual 1.0% interest charge, rising to 1.5% for the balance of the period.

The full program cluster – which has three separate phases – runs from July 2006 to around March 2011 for a total estimated cost of about $600 million. The Planning and Development Department of the Government of Punjab is the executing agency.

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