The Asian Development Bank (ADB) has reportedly slashed 692 million dollars worth of 'at risk' assistance to Pakistan. The ostensible reason: non-compliance with the ADB loan terms and conditions. There is ample evidence that the government of Pakistan, past as well as present, agree to a host of loan conditions that have simply not been doable, given our socio-economic as well as political context.
One such condition is an agreement to end subsidies on tube-wells in Balochistan and Khyber Pakhtunkhwa, a condition that no government, be it a democratically elected one or a military dictatorship, has been able to implement. The condition to implement the reformed general sales tax has also not yet been complied with due to political opposition, a reason for the stalled International Monetary Fund (IMF) Stand-By Arrangement tranche, though the country's economic team remains committed to complying with this condition in the forthcoming budget for fiscal year 2011-12.
Skimming off part of the loans that are made available at market rates by multilaterals and bilaterals is also not unheard of in this country, or indeed in others. In case the skimming exceeds a certain limit, it would obviously render the project at risk. In addition, Pakistan's absorption capacity is low, that does lead to lower utilisation of pledged assistance relative to other countries. And last, but not least, the restive provinces of Balochistan and KP are subject to serious security concerns that have been a major factor in poor implementation. Thus, there is an entire range of factors that explain the ADB's decision to stop or delay implementation of assistance. It is to be hoped that the government of Pakistan takes cognisance of these major issues and undertakes appropriate reforms.
However, what is not that understandable is deletion from the list, not delay or further engagement with the implementing agencies of these projects. This deletion compromises ADB's contention that it is committed to Pakistan's development. And it is this aspect of the ADB that in all probability, led to the refusal of Bank staff to respond to questions by a Business Recorder reporter.
The critical question is whether the blame for failure to comply with rests only with the debtor government? The answer to this question has to be a resounding no. While debtor governments are responsible to a great extent, yet the ADB must also learn to accept responsibility. A 2002 publication titled 'Integrating Risk in ADB's Economic Analysis of Projects' notes that the paper "suggests that, as a general rule, the greater the extent to which risk can be identified and quantified within the scope of routine project economic analysis, the stronger will be the overall project design and the lower likelihood of project failure.
Also, the more comprehensively the objective circumstances and subjective attitudes of the poor project participants can be taken into account in project planning, the greater chance of projects achieving their poverty reduction objectives." Or, in other words, the cost of failure to implement the projects at a pace agreed between the Bank and the government of Pakistan is borne by our economy rather than by the Bank that continues to charge interest as well as the principal, as and when it becomes due on this hapless nation, while deleting the project and thereby ensuring that no benefits would accrue to any beneficiary.
The ADB has forever maintained that it is committed to the development of Pakistan and cites the extent of assistance as proof positive. One would be compelled to argue that the deletion programme is in effect, evidence that it remains committed to its own financial viability at the cost of development and that by failing to take action against the project officers/senior management for formulating and approving projects with a high degree of risk, it is not undertaking due diligence. If Pakistan is to undertake due diligence then so must the ADB. The ADB's Integrity Division must not only look at outright corruption, but also look at incompetence.