The Asian Development Bank (ADB) has proposed a $ 7.5-billion lending programme for Pakistan for the next three years, allocating one-third of the total for budgetary support to the cash-strapped country, according to a media report.
Pakistan’s largest lender on Thursday unveiled its Country Operation Business Plan for 2019 to 2021, which would cover first three years of the Pakistan Tehreek-e-Insaf (PTI) government, the Express Tribune reported.
Pakistan is also seeking $ 8 billion from the International Monetary Fund (IMF) to bail itself out from a severe balance-of-payments crisis that threatens to cripple the country’s economy.
The ADB’s proposed sovereign lending programme of $ 7.5 billion, over 71 per cent or $ 5.3 billion will be given on commercial terms. The remaining $ 2.2 billion will have concessionary interest rates, according to the ADB.
However, against the proposed lending plan of $ 7.5 billion, the ADB indicated that available resources during the period would be $ 5.7 billion. The overall lending size is consistent with the last three-year Country Operation Business Plan.
Final loan allocation will depend on available resources, project readiness, project performance and debt distress rating of the country among others, according to the strategy document.
The lender has proposed giving $ 2.4 billion or 32 per cent of the total loans for budgetary support over the next three years.
Policy loans
Subject to overall macroeconomic stability, the policy loans will be given for energy-sector reforms, improving trade and competitiveness and financial market development.
These policy loans will be pegged with conditions like further liberalisation of Pakistan’s economy.
The full loan disbursement for budgetary support will also depend on Pakistan’s ability to secure a bailout package from the International Monetary Fund (IMF) at the earliest.
The flow of loans from multilateral lenders disrupted during the past almost two years due to deterioration in Pakistan’s economic conditions.
Some of the proposed policy loans of the ADB for energy and trade sectors remained undisbursed last year.
The ADB said the proposed assistance pipeline for Pakistan may need to be further adjusted, particularly for 2020 and 2021.
Nearly 30 per cent or $ 2.24 billion in loans have been proposed for the energy sector for the next three years, higher by 22 per cent or $ 500 million.
The pipeline includes a multi-tranche financing facility for the Transmission Strengthening for National Transmission and Despatch Company (NTDC), a hydroelectric power development project of the Water and Power Development Authority (Wapda) and support for the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project.
Loan Agreement
Pakistan and the ADB on Thursday also signed a loan agreement amounting to $ 280 million for the Second Power Transmission Enhancement Investment Programme — Tranche-3. Economic Affairs Division Secretary Noor Ahmed inked the loan agreement with ADB Country Director Xiaohong Yang.
The ADB has proposed $ 1.4 billion in loans for the transport sector, which is nearly one-fifth of the total allocation for the next three years.
The proposed lending programme for the transport sector is 22 per cent or $ 400 million less than the previous allocation.
The ADB plans to give loans for the sustainable national highway project and the Sindh Hyderabad Southern Bypass project. It also proposes support for the revitalisation of Pakistan Railways to improve transport sector’s sustainability, including exploring unconventional financing arrangements.
The Manila-based lender has cut its allocation for the agriculture sector by 28 per cent to $ 794 million. Over one-tenth of the total envelope will go to the agriculture sector.
The pipeline includes the Greater Thal Canal Irrigation project, Kurram Tangi Water Resources project and Smaller Cholistan Water Resources Development project.
Allocation for the water sector has been increased by 180 per cent to $ 470 million. The pipeline includes a cross-sector project readiness facility for Punjab and the Punjab Cities Improvement project.
A major chunk of $ 2.4 billion or 32 per cent of the total loans has been set aside for finance and public-sector management aimed at providing policy loans. There is an increase of 26 per cent or $ 500 million in budget financing support for the government.