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MANILA, PHILIPPINES - A US$200 million ADB loan will help further improve fiscal and financial governance and public service delivery in Punjab, Pakistan.

Punjab, with nearly half the national population of 140 million and an estimated 57% of the country's GDP, has led the country in the recent economic recovery. However, growth in per capita income has not been evenly spread, and as a result, Punjab is home to most of Pakistan's poor.

The loan is for the second phase of the Punjab Resource Management Program (PRMP). The first phase, approved in 2003, improved the short- to medium-term fiscal management of the provincial government, enabling higher spending for the social sector and the effective devolution of social service delivery to local governments.

Formulated in coordination with various stakeholders, the second phase will help Punjab reform governance structures, systems, and procedures to provide "fiscal space" for sustainable development activities and to ensure the effective and transparent use of funds.

It will strengthen institutional arrangements to increase the impact on the poor of public expenditure and improve service delivery. The program will also help create a conducive environment for private sector development, growth, and income generation.

"Long-term change management can only be sustained through a professional and accountable civil service. In addition, effective long-term resource management will entail rationalizing the role of the public sector," says Jorn Brommelhorster, an ADB Public Resource Management Specialist.

"Facilitating private sector development will allow the provincial government to reduce public sector employment pressures and support sustainable economic growth."

ADB plans to provide a total of about $500 million over five years in support of the PRMP. In addition, ADB's Punjab Devolved Social Services Program is helping the provincial government to meet its spending targets for the sector and improve mechanisms for fiscal transfers.

A $150,000 technical assistance (TA) grant accompanies the loan to prepare the third phase of the PRMP. The provincial government will contribute $37,500 equivalent towards the TA's total cost of $187,500.

ADB's loan comes from its ordinary capital resources. The loan carries a 15-year term, including a grace period of 3 years. Interest will be determined in accordance with ADB's LIBOR-based lending facility.

The Planning and Development Department of the government of Punjab is the executing agency for the program, which is due for completion around mid-2007.

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