The Economic Affairs Division (EAD) has drafted a foreign assistance policy framework ensuring that grants and concessional loans are used only for those projects that exclusively contribute to investment and particularly designed to accelerate economic growth. Secretary EAD, Muhammad Saleem Sethi, informed the Public Accounts Committee's sub-committee on Thursday that EAD has prepared a draft legislation on foreign assistance policy framework which would soon be placed before Cabinet for approval.
The objective of the policy framework is to evolve a mechanism to identify areas where foreign assistance is badly needed. "At present, donors collect funds from other countries and offer them to Pakistan, which are not demand-driven," he said. The official further said that the policy framework would be laid before the parliament for a further legislation, if required. It would also be applicable on provincial governments, he added. Sources said the government would give preference to grants and soft-loans over other types of loans and these loans would only be used in cases where it had been established that the proposed project would contribute to investment and accelerate economic growth. "In all cases, the implications of each new loan shall be carefully examined, including its impact on macro-economic stability and debt sustainability before acceptance," they added.
Pakistan is one of the top recipients of aid from foreign donors that had resulted in problems like misalignment between donors' and government's priorities for aid utilisation with no standard monitoring mechanism. In its observations, audit officials stated that the country is losing interest-free grants while its dependence on interest bearing foreign loans is growing especially in the context of its commitment toward the Millennium Development Goals (MDGs).
While examining an audit observation that a grant worth $568 million lapsed during January 2006-June 2008, Member Committee Mian Abdul Mannan remarked it was criminal negligence that about 85 percent of grants have been lost during January 2006-June 30, 2008. Secretary EAD, however, replied that the grants lapsed in the given time period, but were utilised in the following years.
The committee further recommended the recovery of export credit from those countries whose economies are stable. The committee was informed that $153.729 million was outstanding against countries facing financial crises. These include Bangladesh, Sri Lanka, Tajikistan, Uganda and Sudan.
Secretary EAD maintained that these countries have been expecting debt relief from Pakistan by converting loans into grants. The matter was repeatedly discussed with them in the joint ministerial commission. The committee meeting was held on Thursday under the convenership of Rana Afzaal Hussain. It examined the audit reports of EAD and Establishment Division.
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