ADB unveils $2.5 billion package for Pakistan

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Economic Updates - Pak Major Financial News

The Asian Development Bank on Wednesday unveiled a two-year $2.5billion lending programme for around two dozen development projects in Pakistan.

ADB’s Pakistan Director Werner E Liepach said the ADB would not provide financial help to Pakistan to finance the budgetary deficit. Interacting with the media here, Liepach said the ADB would provide funds only for the projects and not for the budgetary support. In its two-year Country Operations Business Plan for 2013-14, the ADB has refrained from committing funds for the multi-billion dollar Diamer-Bhasha Dam. It has indicated a technical assistance of $15million only as part of a 'standby' portfolio instead. But this amount is "subject to a broader agreement and pre-requisites". About the Diamer-Bhasha Dam, the ADB official said it was a vital power project, but questions arise on its financing, as from where a sum of $12billion would come to complete the project.

“The government has reduced power subsidies and allocated more funds for the Diamer-Bhasha Dam, a project in which 4500-megawatt electricity could be generated to overcome the ballooning energy shortfall to some extent. The government would have to increase the power tariff in order to reduce the subsidies,” added the ADB official.

Liepach further said that circular debt was one of the major problems of Pakistan, which, according to him, had gone beyond the country’s developmental budget. He was of the view that the power crisis could be resolved by improving the tariff system.  As per the loan programme, the ADB will provide roughly $2.5billion over two years. Of this amount, $1.1billion is concessionary lending and $1.4billion will be offered on commercial terms. At the same time, the bank has made it clear that the concessionary lending will depend on Pakistan's rating under the performance-based allocation system.

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