During his recent visit to Pakistan, the Director General (DG) of the Asian Development Bank's (ADB) Central and West Asia Regional Department (CWRD) committed assistance of 6 billion dollars to Pakistan in the next three years, a package which, he said, did not include support for dams.
In addition, he also promised that ADB would assist in mobilising 7 to 9 billion dollars of private sector equity for investment in Pakistan. Thus a total of $12 to 15 billion in three years was pledged by the ADB official.
Critics of ADB may well argue that this 'support' appears propitiously close to the Presidential and general elections in Pakistan, a support which is in contravention to ADB's charter of political neutrality.
In its defence the ADB may point out that this commitment is a reflection of an ongoing development partnership that has always existed between the ADB and governments in Pakistan past as well as present - a partnership that was even evident after the Nawaz Sharif government was shunned by the rest of the world development polity when it decided to carry out the retaliatory nuclear tests.
This is certainly true and over the years ADB has emerged as one of the most important development partners of this country. However, in recent months the rhetoric from ADB has increasingly become more political and the claims made by its senior management have become more unbelievable.
First and foremost, it must be made clear that it is the Pakistan government that must determine how much it wants to borrow and for what purpose, not a multilateral bank. Thus while many would support borrowing heavily to build dams in an effort to meet the energy shortfalls that cost the nation billions in lost revenue each year, few would support heavy borrowing for other sectors.
The ADB in its support may well argue that the assistance package was announced after consultations with the government. This may be true; however, given Prime Minister Shaukat Aziz's numerous statements about the begging bowl having been broken such comments, made unilaterally by a member of a multilateral institution, seem inappropriate at best.
The government cannot, however, determine at what terms it gets the loans from ADB. That is determined by ADB's policies over which the CWRD chief has little control. In this instance, the DG appears to have deliberately misled the Press when he said that the performance of the government has improved vis-à-vis governance, which, he implied, will account for the lending rise.
Concessional lending channelled through the Asian Development Fund (ADF) - a Fund replenished by the rich member countries of ADB - is, at the insistence of its donors, linked to the performance of the debtor country on a number of indicators, including governance. According to the statistics available, Pakistan has suffered a decline in the amount of concessional lending it can access from ADF in recent years because of poor performance compared to other ADB borrowers of ADF.
While no one would argue against the government borrowing at concessional terms (at present only around $630 million for two years is available to Pakistan under this head) the remaining amount pledged by the CWRD would have to be on non-concessional market terms.
In this context the government must assume a more proactive role than it has in the past and more aggressively negotiate aid conditionalities with ADB that, by and large, erode the meagre social protection measures that are in place in this country - an approach much favoured by the Indian and the Chinese governments. This should also make the government consider alternatives such as commercial borrowing which, though expensive, does not come with any conditions.
The CWRD chief also misled the Press by promising assistance to mobilise $7 to 9 billion private sector investments for Pakistan. To put this in perspective ADB in total has been able to mobilize no more than $3 billion under this head to date.
Even supporters of the ADB would agree that to mobilize three times that amount in three years and only for Pakistan which is currently undergoing political uncertainty, will be a Herculean task. It is unfortunate that an institution like the ADB, that was marked by discretion and unflinching support for Pakistan in the past has made itself controversial through such ill advised remarks.
What our government officials must keep in mind is that the measure of ADB staff performance is the total amount of lending made by any one department. Thus for the CWRD chief to be able to extend that kind of unprecedented assistance to Pakistan is tantamount to good performance. As one of the third most important client of the ADB, after China and India, Pakistan is now in a strong position to not only dictate its terms rather than accepting all terms and conditions set by the ADB but also to inform the bank staff of its needs rather than the other way round.
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