Macroeconomic stability: Fiscal consolidation, policy reforms key to success: ADB

ISLAMABAD: Continued efforts toward fiscal consolidation and policy reforms will be key to sustaining improvements in macroeconomic stability, especially in broadening the tax base and improving the business environment, says the Asian Development Bank (ADB).

The bank in its, “Asian Development Bank and Pakistan: Fact Sheet”, noted reforms are required to promote high value-added exports, expand social spending, reinforce energy sector financial and technical sustainability, and implement structural changes that will strengthen institutions and create jobs.

Total outstanding balances and undisbursed commitments of the ADB’s non-sovereign transactions in Pakistan as of 31 December 2021 was $441.31 million representing 3.14 percent of the ADB’s total private sector portfolio.

To date, the ADB has committed 723 public sector loans, grants, and technical assistance totaling $37 billion to Pakistan. Cumulative loan and grant disbursements to Pakistan amount to $28.27 billion. These were financed by regular and concessional ordinary capital resources, the Asian Development Fund, and other special funds. The ADB’s ongoing sovereign portfolio in Pakistan includes 48 loans and three grants worth $8.42 billion.

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In 2021, the ADB’s loan and grant disbursements to Pakistan amounted to $1.31 billion, comprising $0.3 billion in program lending and $1.01 billion from project lending and $3 million from grants. The ADB’s support to Pakistan’s coronavirus disease (Covid-19) pandemic response in 2021 included a $500 million loan in August to help procure and deploy safe and effective vaccine, and a $603 million loan—of which $3 million is from the ADF—for an integrated social protection program to strengthen Pakistan’s flagship Ehsaas program. The loan is complemented by a $24 million grant from the Education Above All Foundation.

The program builds on an earlier $500 million loan under ADB’s COVID-19 Active Response and Expenditure Support Program and a $300 million emergency assistance loan to strengthen Pakistan’s public health response to shield the poorest families from the pandemic.

The ADB committed $300 million for the construction of Balakot hydropower plant on the Kunhar river near Balakot City in Khyber Pakhtunkhwa. By 2027, the plant will add 1,143 gigawatt hours of clean energy annually to the country’s energy mix, enhancing the energy sector’s reliability and sustainability.

Another $300 million policy-based loan was committed to support reforms to strengthen Pakistan’s energy sector and improve its financial sustainability. The program will help reduce and manage the accumulated cash shortfall across the power supply chain known as circular debt. The ADB continued to strengthen Pakistan’s finance sector, develop competitive capital markets, and encourage private sector investment.

The ADB committed a $235 million loan to further upgrade the 222-kilometer Shikarpur–Rajanpur section of the National Highway 55 from two lanes into a four-lane carriageway, linking the ports of Karachi and Gwadar in southern Pakistan with national and international economic centers to the north. ADB committed $385 million loan to improve the livability and community health in the Khyber Pakhtunkhwa cities including Abbottabad, Kohat, Mardan, Mingora, and Peshawar, benefiting over 3.5 million people, the report noted.

The update further noted that cumulative co-financing commitments in Pakistan are as Sovereign co-financing — $4.63 billion for 53 investment projects and $105.87 million for 64 technical assistance projects since 1973, Non-sovereign co-financing — $11.72 billion for 21 investment projects since 1993.

In 2021, Pakistan received a total of $450 million loan co-financing from the Asian Infrastructure Investment Bank for two investment projects, and $24.48 million grant co-financing from the Education Above All Foundation for the Integrated Social Protection Development Programme.

Copyright Business Recorder, 2022