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MANILA, PHILIPPINES (4 December 2003) - ADB is assisting the Government of Punjab, Pakistan, with reforms in governance, institutions, and provincial finances that will make public service delivery more efficient, pro-poor, and sustainable, through a loan package approved today totaling US$204 million.

The loan package will finance the first phase of the Punjab Resource Management Program (PRMP), which aims to improve Punjab's socioeconomic indicators and bring down rising poverty levels, as outlined in the federal Government's Poverty Reduction Strategy Paper.

The program has been developed by the Punjab Government in close cooperation with ADB, with a flexible design structure to achieve agreed outcomes within a medium term framework.

To support the PRMP, ADB plans to provide a total of about $500 million over five years through a series of up to three program loans under the cluster program modality.

The emphasis of the first loan, which will be implemented over the next 12 to 18 months, will be on reforming provincial finances through fiscal restructuring and financial management.

It will also initiate reforms to promote pro-poor service delivery that aim to create opportunities for growth and income generation through private development, to be deepened under two subprograms that are planned to follow.

"To achieve fiscal sustainability of the reforms, the program aims to bring about a structural shift in the provincial financing pattern," says Werner Liepach, ADB's Mission Leader for the Program.

"Strengthening provincial revenues, rationalizing provincial expenditures and improving effectiveness and accountability in financial management will provide a stronger revenue base to finance a switch in expenditures toward high-priority social sector work."

The program will improve the effectiveness and accountability of financial management by bringing in transparent and user-friendly budgets and accounts, and financial and procurement systems.

It will also seek to create a conducive environment for private sector development, with a shift of government away from direction, control and direct involvement in operations toward promotion, facilitation, and support for public-private partnerships.

"Creating job opportunities in the private sector, including rural areas where the majority of Punjab's poor live, is key for accelerating growth and sustained poverty reduction," says Marshuk Ali Shah, Country Director at ADB's Resident Mission in Pakistan.

Pakistan has initiated substantial governance reforms over the past three years, with devolution of powers at their heart. As primary responsibility for service delivery in many areas now lies with local governments, provincial governments have to adjust to a new role with a focus on policy setting.

But despite many initiatives to develop Pakistan's economic and social sectors, social indicators are lagging those of countries with similar income levels and the incidence of poverty today is higher than a decade ago.

The social indicators of Punjab, the country's most populous and economically significant province, accounting for more than half of the national population, are reflective of the country as a whole.

"Any progress that can be achieved in Punjab could have a far-reaching impact on the country and its people as a whole," Mr. Shah adds.

To better manage the comprehensive nature of the PRMP over the medium term, a cluster structure has been adopted for the program, which aims to be more than just a collection of three stand-alone subprograms to be carried out in sequence. It will capture a dynamic process by addressing various reform initiatives simultaneously over the medium term with flexibility for performance-based adjustments, a process in which the first subprogram will be the first step.

The program will complement and integrate at the provincial level with various other governance-related initiatives, such as for fiscal devolution, decentralized service delivery, financial reporting and auditing, and gender reform.

An ADB loan for the first subprogram - $200 million from its ordinary capital resources - carries a 15-year term, including a grace period of three years. Interest is determined in accordance with ADB's LIBOR-based lending facility.

It is complemented by a technical assistance loan of $4 million to support public resource management reforms in Punjab, including tax and revenue administration, strategic planning systems, human resource management, and land registration.

Punjab's Planning and Development Department is the executing agency for the program, and has established a specialized unit that has been staffed professionally to ensure effective implementation. Similar programs are contemplated for the other provinces of Pakistan.