$500m deal signed with ADB to address food, energy crises

[LahoreEstate]

By Sajid Chaudhry

ISLAMABAD: The government of Pakistan and Asian Development Bank (ADB) on Friday signed a loan agreement ‘Accelerating Economic Transformation Programme (Subprogramme-2)’ amounting to $500 million.

Subprogramme-2 is the second part of a larger programme of about $1.5 billion over a period of four years to support Pakistan in dealing with the challenges created by the unprecedented international food and energy crisis.

The loan agreement was signed by Secretary Economic Affairs Division, Farrakh Qayyum and Country Director, ADB, Islamabad Rune Stroem at the EAD’s office. The programme will help the government remove fundamental distortions to support economic transformation and strengthen the financial sector.

The principal objectives of the programme are (i) to achieve and sustain higher economic growth in the medium-term (ii) Expand its social safety net and make it more targeted to protect the poor and vulnerable from the adverse impact of the recent global developments (iii) Adopt structural reforms to address inefficiencies in the agriculture sector, particularly with respect to wheat markets and food security policies and (iv) Take measures to address the energy crises.

In the financial year 2008-09, safety net cover has been allocated up to $5 million or Rs 41 billion for poor families. Through Benazir Income Support Programme, a cash grant of Rs 2,000 is provided every alternate month to qualifying families based on means tested selection criteria using Computerised National Identity Cards (CNIC). The programme helps to empower women by paying benefits to the female head of the family who is required to have a CNIC.

Formula-based scheme has been established with the introduction of market-based pricing system for setting the support price for farmers, taking into account the cost of production, regional prices, import export prices, domestic and global market conditions. The price of wheat for flour millers should reflect all related costs. In this way, wheat subsidies will be reduced to the minimum.

The government has adopted the power sector circular debt resolution plan which includes; (i) Confirmation of the amount of overdue debt owed by the government and others (ii) Development of a financing plan showing when and how the government will pay its debt (iii) Tariff adjustment and other measures to prevent reoccurrence of circular debt (iv) Measures that will improve finance, accountability and corporate governance of public sector entities in the power sector and (v) Implementation timetable and monitoring framework.

To strengthen the financial and operational autonomy of the Financial Market Unit, amendments have been made in the Anti-Money Laundering Law to improve the financial market governance. To ensure the sustainability of these reforms and promote transparency in the implementation, the government shall provide quarterly progress to the ADB on the status of implementation to promptly and proactively address any implementation issue that may arise. An action plan is prepared in this regard and first quarterly review mission will be held at the federal and the provincial levels in the fist week of July 2009. Slow moving projects, which are causing cost to the government will be reviewed to clean up the portfolio and bring number of projects to manageable level.

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