Growth prospects of Balochistan hurt further: ADB

[Naveed Yaseen]

FAISALABAD (December 22 2008): Asian Development Bank observed that the lack of private sector participation in the development process further hurts growth prospects of Balochistan. Balochistan province is rich in minerals, but private sector plays a limited role in the sector, it noted.

In an update report on "Second Balochistan Resource Management Programme", which was prepared by Central and West Asia Department (CWRD) of ADB said that the entry barriers are significant, and these are aggravated by poor physical infrastructure and adverse security conditions.

Presently, the report said, Balochistan faces both exogenous and endogenous challenges. Its large landmass, scattered population, and extremely low population density translate into high costs to deliver public services, lack of economies of scale in public spending, and segmented factor and output markets.

Compounding these issues are weak government mechanisms for planning and fiduciary control, resulting in waste and inefficient allocation of resources.

In addition, the government of Balochistan is resource constrained. Its own-source revenue generation is low, and the province depends heavily on federal transfers. The province suffers from chronic fiscal deficits, resulting in mounting overdrafts with the central bank, it said.

Balochistan has limited fiscal resources, generates little own-source revenue, and depends heavily on federal transfers, which account for about 93 per cent of its total revenue. At the same time, the provincial government has a high overdraft with the central bank. The pension reform and other expenditure management measures will help manage contingent liabilities and recurrent expenditures better.

CWRD report pointed out that two loans, totalling $100 million, will help finance subprogram-1 of BRMP-II. The first loan of $45 million will be financed from ADB's ordinary capital resources, with interest to be determined in accordance with ADB's London interbank offered rate-based lending facility; a term of 15 years, including a grace period of 3 years; and other terms and conditions substantially in accordance with those set forth in the program loan agreement. The second loan of $55 million will be financed from ADB's Special Funds resources, with an annual interest rate of 1% during the grace period and 1.5% thereafter; a term of 24 years, including a grace period of 8 years; and such other terms and conditions as set forth in the program loan agreement.

Subprogram-2 of BRMP-II is also expected to involve a loan of $100 million, subject to reform progress, and resource requirements and availability, I said.

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