Regions and Countries

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p. 4 of 4 BACK | NEXT I. Current Development Trends and Issues II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Assistance Levels

Country Strategy and Program Update 2005-2006: Pakistan

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IV. Country Performance and Assistance Levels

A. Lending Level Proposed

28. The proposed lending program for 2005-2006 is $1.96 billion for 23 firm loans, including 4 TA loans (Appendix 1, Table A1.10). This is somewhat higher than the $1.72 billion for 17 loans for the same period proposed in the CSPU approved in 2003, but is consistent with the continued improvement in Pakistan’s debt absorption capacity (external debt and liabilities as percentage of GDP declined from 51% in FY2002 to 43% in FY2003, and had reduced further to 38% in the first 9 months of FY2004). In view of the government’s new borrowing strategy, OCR loans have been proposed only for infrastructure sector projects and provincial RMPs. Social sector projects and direct poverty reduction projects, including rural development, are proposed to be fully financed through ADF, as are the TA loans for sector analysis, capacity building, and project preparation. The ADF amounts shown are indicative, and the actual allocation will depend on the revised performance-based allocation policy, expected to be finalized later in 2004. Concept papers for lending products are in Appendix 2.

29. Infrastructure projects to be supported under ADB’s assistance would be those that are already included in the government’s public sector development program and for which preliminary feasibility work was already complete. This will reduce project preparation time, ensure greater government ownership, and reduce delays in project startup following approval. ADB support for infrastructure projects would be subject to compliance with its safeguard and other sectoral policies, as well as consideration of governance and institutional concerns in project formulation. Support for any additional project preparation would be provided as necessary though TA loans and PPTAs included in the assistance program.

B. Nonlending Program

30. The currently identified nonlending program for Pakistan amounts to $10.7 million for 34 projects during 2005-2006 (Appendix 1, Table A1.11). The nonlending program—operationalized through project preparatory and advisory TA as well as economic, sector, and thematic work—will support ADB’s lending assistance to Pakistan, enhance development effectiveness, and assist in capacity building and institutional strengthening. Concept papers for nonlending products are in Appendix 3.

C. Summary of Changes to Lending and Nonlending Programs

31. For reference, the 2004 assistance programs for lending products and for nonlending products and services are provided in Appendixes A4.1 and A4.2, respectively. A number of changes have been made from the CSPU (2004-2006) assistance pipeline in line with the adjustments in the country strategy and the government’s new borrowing policy. The pipeline for infrastructure projects has been strengthened through new projects in transport and communication (including subregional cooperation), energy, and urban renewal and development. A Multisector Rehabilitation Project for Azad Jammu and Kashmir has also been included in 2004. The Cleaner Fuel Project has been dropped from 2004 after the government indicated that it was not prepared to borrow OCR for the project. Three new TA loans have been included in 2005 for capacity building, sector analysis, and project preparation to strengthen the emphasis on development effectiveness. The Trade, Export Promotion, and Industry Program II, which was a standby loan in 2006, has been dropped following the government’s decision to not take OCR for policy-based operations other than the provincial RMPs.

32. Rural development and social sector projects (para. 28), as well as governance programs except for the provincial public resource management programs, are proposed to be financed fully through ADF and not the ADF/OCR mix described in the CSPU. This has necessitated changes in the total loan amounts for these projects/programs, as well as deferring some of them, given the constraint on total ADF availability for Pakistan. Small ADF anchor loans have been included in 2005 for the Agribusiness Development Project (deferred to 2005 from 2004), and the Public-Private Infrastructure Financing Facility in 2005⁶. A small TA loan for the FATA Governance program loan (deferred to 2006 from 2005) has been included in 2005 to build capacity and institutions for governance reform. The Family Protection Project scheduled for 2005, and its PPTA scheduled for 2004, have been dropped because of weak government ownership. Details of changes to the lending pipeline are in Appendix A5.1. The PPTA schedule has been adjusted in line with the revised assistance program, and their amounts revised in line with the planned overall availability of TA funds. IDTA amounts have also been accordingly revised, and new IDTAs added to strengthen the focus on development effectiveness.

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