The Hindu Business Line : Assam to get $100-million ADB loan

New Delhi, Sept. 17 The Asian Development Bank (ADB) is providing a $100 million loan to the Assam Government to support additional fiscal reforms to free up resources needed to boost its economy and reduce poverty in rural hinterlands.

The Japan Special Fund, through ADB, will also provide technical assistance of $6,00,000 for capacity development and for supporting implementation of the programme loan. The State Government will contribute a further $150,000, a statement issued in Manila, the headquarters of the Bank, said.

This is the second sub-programme of the Assam Governance and Public Resource Management Sector Development Programme (AGPRM). The first one was implemented from 2005 to 2007 in close consultation with the ADB.

From 2005 to 2007, the State Government introduced a number of reform initiatives and policy measures to improve its finances and better manage its resources. As a result, its large revenue deficit had turned into a surplus in 2007-2008.

The loan and technical assistance will focus on increasing the revenue department’s administrative capacity, including implementation of new information and communication technology systems. It will also take steps to further improve expenditure management, strengthen debt management systems, and close a number of loss-making public sector enterprises.

“The aim is to improve the State Government’s financial flexibility and ensure that the available fiscal space is utilised to more actively promote social and physical infrastructure development. This is expected to support more private sector investment, income generation and higher employment in the State with a consequent reduction in poverty in the state,” said Mr Kyung Nam Shin, a financial sector economist in ADB’s South Asia Regional Department.

Pay revisions impact

Assam is the largest of seven states in north-eastern India with a population of 27 million and a high incidence of poverty. During the period between late 1990s and early 2000s, Assam’s finances suffered from the effects of pay revisions of the Government employees, high debt ratio to gross State domestic product, and high interest rates.

The introduction of improved policy and administrative reforms on revenue, expenditure and debt management, along with increased transfer from the Central Government have put Assam’s finances on a more solid footing in recent years. However, it is vital that the State Government increases its own revenue generating capacity and rationalising the expenditure and debt servicing costs for sustaining the ongoing fiscal consolidation initiatives. The loan will be released in three tranches: $40 million each in the first and second tranches, and $20 million for the third tranche.

More Stories on : Rural Development | Financial Institutions | Other States

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page