The release of the third and final tranche equivalent to SDR 17,996,000 and Yen 12,206,000,000 is scheduled for the third quarter of 2007, but the loan is set to close on 30 June 2007 for ongoing project "The Second Agriculture Sector Programme Loan (ASPL II)".
Meanwhile, additionally, SDR 1,565,000 is being provided until 31 August 2007 for technical assistance (TA) to facilitate the implementation of the agriculture sector programme, said Asian Development Bank (ADB) sources.
According to update project report of ASPL II, the third tranche was to be released within 60 months of loan effectiveness (by the end of third quarter of 2007). But the loan closing date specified in the loan agreement is three months before that. ASPL-II progress report on the third tranche should be assessed in this context, and in view of the significant headway made by the government in meeting the policy conditions for the release of the third tranche.
The second agriculture sector programme loan (ASPL II) to Pakistan was approved by the Asian Development Bank (ADB) on 13 December 2001, comprises three loans totalling the equivalent of 350 million dollars from the Asian Development Fund (ADF) and ordinary capital resources (OCR).
With the primary objective of promoting growth through increased agricultural productivity and profitability, project report revealed that the programme was designed to assist the government in removing policy distortions and supporting institutional restructuring. Its specific reform measures are aimed at: (i) promoting efficient markets for major agricultural commodities, including wheat, cotton, rice, and sugarcane, to encourage market-based incentives for small farmers; (ii) liberalising markets for agricultural inputs, particularly fertilisers and seeds; and (iii) strengthening support for small-farmer extension, training, and research services, as well as regulatory functions that improve input quality control. Ministry of finance is the executing agency for the programme, while the ministry of food, agriculture, and livestock (Minfal) has day-to-day responsibility for implementation and monitoring, in coordination with other federal ministries and the provincial governments.
The ADB report mentioned that the release of the loan tranches is subject to the fulfilment of policy and institutional reforms required under the programme. The progress report discusses the ASPL II achievements in the context of recent developments in agriculture, and the socio-economic political factors that have influenced the nature, form, and extent of progress made under the programme. It then evaluates the status of compliance with the 11 policy conditions set for the release of the third tranche. These include the four deferred second tranche conditions, and the seven third tranche conditions.
Pinpointing the constraints of the project, ADB report mentioned that socio-political factors influenced the nature, form, and extent of compliance of the programme with the policy conditions.
The interplay of these factors explains in large measure why the release of the second tranche took much longer than originally scheduled, and compliance with some of the policy conditions under the third tranche was a challenging task. First, programme implementation coincided with a major political change in the country. The assumption of power by a military regime in 1999 resulted, among other things, in the decentralisation of government operations, especially the delivery of extension services to local governments.
Moreover, policies and regulations on agriculture-related matters have mainly been a constitutional mandate of the provincial governments. Even the rules of business of the federal government, which give Minfal authority in agriculture policy and regulatory measures, are continually being refined, and these formerly federal roles are being transferred to the provincial governments. In fact, some policy conditions under ASPL-II were within the formal jurisdiction of the provincial governments or were handled by them in practice even before ASPL-II, said ADB report.
At the start of the programme, ADB report disclosed that policymakers in the provincial governments, who were affected by many of the policy conditions under ASPL-II, did not have a sense of ownership of the programme, as they had not been fully involved in its design. Only the federal government was committed to implementing the policy reforms under ASPL-II.
After meeting the policy conditions under the first tranche, Minfal invested in ensuring a shared understanding of the ASPL-II's impact, outcomes, and deliverables with the provincial governments through consultation meetings, dialogue, and workshops. The provision of counterpart funds for the development projects of provincial governments also facilitated their implementation of the policy conditions under ASPL-II.
Once the provincial policymakers gave their full support and commitment to ASPL-II, progress speeded up, and it became possible - though still challenging - to complete some unfinished tasks under the second tranche and to meet substantially most of the seven policy conditions of the third tranche within the stipulated time.
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