Regions and Countries

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p. 6 of 25 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Pakistan : I. Country Performance Assessment

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E. Implementation Assessment

1. The Portfolio

30. Since the start of lending operations to Pakistan in 1968, the ADB has approved 164 public sector loans for more than $9.8 billion, of which $4.1 billion (41 percent) is from OCR and $5.7 billion (59 percent) from ADF. Pakistan is ADB's second largest ADF recipient, and the second largest borrower overall. Total lending includes four program loans for a total of $1.1 billion. About $1.12 billion representing mostly loan savings, has been cancelled. The majority of the ADB's lending has been for energy and natural resources management. During the last five years (1994-1999), there has been a significant increase in lending to the social sectors which account for about 21 percent of the active portfolio, with the agriculture/natural resources and energy sectors accounting for 31 and 21 percent, respectively, and the finance/industry sector, 18 percent. The active loan portfolio amounts to $3.5 billion for 44 loans. Of this, $1.6 billion has yet to be disbursed. Disbursement performance over the past five years has been reasonable, averaging around $478 million annually, approximately in line with new loan approvals. The disbursement ratio for the period was also reasonable, averaging about 19.9 percent including program loans and 18 percent without program loans, compared to the ADB's overall average of 22.6 percent and 18 percent, respectively.

2. Issues in Project Implementation

31. Despite satisfactory disbursements, implementation delays remain a feature of the ADB's portfolio in Pakistan. Of the undisbursed amount of $1.6 billion, $601 million, or 38 percent, is on account of delayed project implementation. In addition, the ADB's portfolio now shows a relatively high average age of about five years. To rationalize the portfolio and the completion of individual projects, it was decided in 1997 that in view of the constrained economic situation, the country program would emphasize quick disbursing, policy-based program lending. This would be accompanied by a medium-term decrease in project lending volume and a rationalization of the existing portfolio. In 1998 a spring cleaning exercise was conducted by PRM, and by the end of the year some $215 million in savings had been identified and $238.52 million has been cancelled. The rationalization of the portfolio, together with the continued application of strict linkages between annual disbursement levels, new approvals, and the size of the undisbursed balances, should ensure that the portfolio remains healthy over the program period and beyond. Appendix 2 provides information on portfolio performance indicators.

32. Biannual Country Projects Review Missions (CPRM) analyze the performance of loan and technical assistance and seek agreement with the Government on measures required to improve performance. Despite agreed action plans to resolve outstanding implementation issues, portfolio performance has not demonstrated any significant improvement as reflected in continuing implementation delays, poor track record in meeting policy covenants and commitments for operation and maintenance expenditures, and lack of adequate ownership. Persistently poor portfolio performance, combined with the shortage of counterpart funds expected over the medium-term, will require ADB to follow a conservative and increasingly strict performance-linked approach in determining the level of new assistance to Pakistan. In addition to the performance of specific projects ADB is paying particular attention to the policy environment in which projects are formulated.

33. While the immediate implementation problems need additional in-country attention, the ultimate value of the portfolio is its impact on Pakistan's development. Postevaluation findings have shown that the development impact of many completed projects in Pakistan has been much less than anticipated. The reasons for this are diverse but typically have included inadequate implementation of policy based covenants, lack of in-country ownership and involvement in project design, and inability to meet commitments for sustained operation and maintenance of completed project facilities. All new projects will, therefore, need strong participatory characteristics and carefully designed benefit monitoring and evaluation components where appropriate, and means to monitor governance issues and development impact.

34. A review of the project completion reports of Bank-assisted projects¹³ over the last twelve months indicates that of the six completed projects, four were classified as only partially successful, one was classified as generally successful, and one was classified as unsuccessful. Improved implementation performance and full compliance with the respective loan and project agreements would contribute towards a greater number of completed projects receiving a successful rating.

35. The limited availability of counterpart funds has emerged as another major concern. While ADB-funded projects have generally been protected against budgetary cuts through inclusion in the core investment program of the Public Sector Development Program (PSDP) at the federal level, particularly for water sector projects implemented by WAPDA, for example, or the Annual Development Plan (ADP) at provincial level, the continuing budgetary difficulties and fiscal weaknesses threaten this basic requirement. Strict prioritization of project lending, careful assessments of budgetary implications of new lending, and close monitoring of fund releases and their inclusion as major performance criteria will thus be critical elements of the ADB's operations in Pakistan over the program period.

36. In this context, a recent ADB review shows that the typical reasons for projects not achieving their anticipated development impact include: (i) less than thorough project assessment including analysis of institutional capacity, beneficiaries needs, bureaucratic complexities and constraints; (ii) undue reliance on a strategy of concurrent capacity building; and (iii) weak interagency coordination. Resolution of these issues is set out in a detailed action plan which is dealt with in the biannual country project review meetings between the Government and PRM¹⁴.

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