ISLAMABAD: In a rare rebuff, the Asian Development Bank (ADB) on Sunday distanced itself from a Pakistan government announcement about provision of $3.4 billion budgetary support by the Manila-based lending agency.
On Saturday, two senior members of the government had announced that the ADB would provide $3.4bn budgetary support to Pakistan to help the latter implement its economic reforms and stabilisation.
The announcement was first made by Planning and Development Minister Makhdum Khusro Bakhtyar at a news conference and then reconfirmed by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh through his official Twitter account after a meeting with two senior officials of the ADB.
Dr Shaikh had said the ADB would provide $3.4bn in budgetary support to Pakistan after he had a meeting with Werner Liepach, the ADB director general. He said the meeting had agreed on an ADB programme. “The ADB will provide $3.4bn in budgetary support to help with reforms and stabilisation of the economy.”
Says volume of financial assistance, once finalised, is contingent upon its board approval
The adviser had also said the ADB would “release $2.2bn this fiscal year, starting in the first quarter of FY2019-20. This will help the reserve position and the external account,” he said, adding: “This support is in addition to the project portfolio with an estimated disbursement of up to $1bn in FY2019-20. I appreciate the commitment of the ADB to our economic reform”.
However, the ADB’s country office in Islamabad took a rare step on a public holiday to issue a statement distancing itself from the government’s pronouncement. The ADB has seldom come out on its own to comment on a government statement.
In its statement, the ADB confirmed the meetings with the government members and discussions on loans. “These discussions are ongoing and details of the plans as well as the volume of ADB’s financial support, once finalised, will be contingent upon the approval of ADB management and its Board of Directors,” said ADB’s Country Director for Pakistan Xiaohong Yang in the statement.
Informed sources said the ADB management was embarrassed by the government’s premature announcement about the ongoing discussions on loan programme which the bank had not even taken up with its board of directors and had to take an extraordinary step to downplay the discussions.
The sources said the ADB delegation which had met Dr Shaikh was also not authorised at its own to finalise any loan programme that normally involved long-drawn discussions. Moreover, the ADB had also linked its loans for budgetary support to the approval of $6bn bailout package from the International Monetary Fund for a 39-month reforms programme.
This was also evident from a statement by ADB President Takehiko Nakao early last month linking the $1bn budgetary support to Pakistan with the IMF programme. Speaking at a news conference at the 52nd Annual Meetings of Board of Governors in Fiji, the ADB president had said his bank had received a request from Pakistan for a budget support of about $1bn in addition to its IMF programme and normal large operations of the ADB for years.
“We are waiting for a good outcome of discussions on an IMF programme and if the IMF programme is there we would be happy to extend the budget support and other policy loans quite soon,” Mr Nakao said. He had expressed concern over Pakistan’s repeated requests to the IMF for bailouts.
In its statement on Sunday, the ADB said it was “discussing with the GoP [government of Pakistan] plans to provide budget support programmes, results-based and project assistance to help improve Pakistan’s competitiveness and fiscal sustainability”. It said the bank could help the government manage external debt and balance of payments and maintain the momentum of macroeconomic and structural reforms to support economic stability and expansion. “ADB is pleased with the progress of discussions with the government of Pakistan on these issues,” concluded the statement.
The sources said the statements by the cabinet members focused on the exchange rate as the rupee has been losing its value against the dollar for more than a year with no let-up even after the announcement of the federal budget last week.