Asian Development Bank (ADB) has warned that there would be no further lending programme to Pakistan unless it brings macroeconomic stability through implementation of reforms or gets a Letter of Comfort (LoC) from the International Monetary Fund (IMF) to be eligible for the ADB support. Dr Werner Liepach, ADB's Country Director to Pakistan said this while talking to a select group of journalists here on Thursday.
"It depends upon the discretion of the government of Pakistan whether it likes to go for a new loan programme or not but one thing must be clear that the country has to ensure macroeconomic stability through reforms in tax and energy sectors at any cost. Otherwise, it may be deprived of assistance from the international donors. ADB is not ready to give even a single penny unless the country ensures implementation of reforms or else gets LoC from the International Monetary Fund (IMF)," Dr Liepach said.
Although the country's economic managers have opted not to go for fresh IMF lending programme, even then Pakistan should continue following the reform path to overcome its challenges, he stated. The programme lending will be adversely affected if the projects are not carried out as per the terms and conditions of ADB, the Country Director added.
He revealed that the government of Pakistan had requested the Bank for assistance to overcome the issue of circular debt and the ADB had started work on it. Liepach said there were eight ADB programmes in the pipeline. Out of these 8, four are energy sector projects. These are Renewable Energy programme, Energy Efficiency, Distribution and Transmission Losses. Two projects are in Transport sector - National Highway and National Trade Corridor programme. One is in the water sector in Punjab and one is on Urban Services.
"5-6 billion dollars have been allocated for all these ongoing programmes while so far $2 billion have been committed," he informed. The Country Director added that it would be rather challenging for Pakistan to manage its economy without any financial support. Water management is one of the major issues in Pakistan and the ADB is formulating a report to improve the efficiency of water management in Pakistan. The report will be finalised in December. "A year ago, a report was formulated on water management by ADB and Friends of Pakistan (FoP) but the coming report would be more comprehensive and in a sense explosive," Liepach said.
The ADB Country Director said that Pakistan had a strategic importance and the country had great potential. "Pakistan has a low growth rate. Without solving the energy issues, Pakistan can not succeed in getting the growth on track," he said.
Liepach added that Pakistan joined CAREC last year and with the rapid economic expansion in India there is an opportunity for CAREC countries to achieve higher levels of economic growth. Central Asia is growing economically and it has to use Karachi port for trade. So, Pakistan needs to improve the port to develop its trade links with the central Asian countries. "Pakistan needs to develop its infrastructure, agri-business potential, water management efficiency and the power sector," he further said.
Liepach said that weaknesses and issues have already been identified in Pakistan like proper tax base, power price and sector reforms, access to finances, roads and regional connectivity and there is a need to meet these challenges and ADB is committed to helping Pakistan in this regard.
He argued that at a time when all the neighbouring countries like China, India and Bangladesh are on higher growth path, there is a need for Pakistan to come out of its low growth path. Although it is not easy, but continuous reforms could help Pakistan get out of this.
He said that the overall investment programme of the Bank in Pakistan is based on infrastructure, energy, transport, and water management. "We are ready to finance Bhasha Dam as per request of the government of Pakistan but we need to refine the feasibility study of the dam. While replying to a question by this scribe, he said that Pakistan has to repay more than $700 million to ADB in the current calendar year.
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