The Second Generation of Capital Market Reform Programme (SGCMRP) will continue supporting capital market reforms of Pakistan, while the ADB's ongoing Technical Assistance (TA) programme for the State Bank of Pakistan (SBP) will support the banking sector reforms. The ADB's project completion report revealed.
To develop a more comprehensive approach to financial sector development, the report urged close co-ordination between the executing agencies. As per the report, TA resources should be used to help facilitate development of a framework for a comprehensive financial sector strategy by the SECP, SBP and other key stakeholders.
It is also included in the report that the focus of the ADB interventions should be clearer and within the context of a comprehensive longer-term government strategy that could develop the financial sector-preparedness and monitor in close consultation with key stakeholders.
Further, strong leadership and commitment is needed to ensure that consensus can be reached and momentum retained. The framework for co-ordination among financial sector regulators needs to be institutionalised, it added. 'The strategy should be based on principles that can be codified into legislation versus a list of actions, whose implementation may be impeded by changes in the government,' the ADB report said.
This simplifies the dialogue and gives the country a menu of reform options to pursue based on the country context. The strategy should clarify the government's commitment to develop the financial sector, including the need for a capital market as a key component of economic development, the ADB project report recommended.
According to the report, the ADB-supported actions should be based on detailed analysis, including supply and demand, commitment to reforms based on wide consultation with key stakeholders and linked to policy dialogue in the real sector (linked to financing needs).
Further, to address the absorptive capacity constraints, a common constraint in the region, the ADB should develop regional training initiatives (including information sharing) that would also facilitate greater regional co-operation, it said.
Further, Programme interventions that support bond market development need to address related risks like debt management, debt recovery, property rights, contract enforcement among others more effectively.
According to the report, future interventions need to reflect more effectively the capacity of the government and ADB (including resources) to implement. Reforms should be targeted and strategy and time frames for implementation should be realistic. Support to enable the frameworks, needs to be complemented with support for implementation, along with a monitoring framework to clarify the impact of such reforms on the real sector.
In addition, the ADB report pointed out that the Financial (Nonbank) Markets and Governance Programme (FMGP) also lacked strong leadership to reconcile diverse interests.
'A greater impact could have been achieved through stronger analyses of supply and demand issues and a more selective focus on a few core areas and key principles (versus specific actions that could more easily be reversed or undermined),' it stressed. The Financial (Nonbank) Markets and FMGP was designed prior to the adoption of the new results-based framework at the ADB, along with the design and monitoring framework template.