ADB to give $0.9m assistance on grant basis

ISLAMABAD: The Asian Development Bank (ADB) will provide technical assistance (TA) envisaging improved debt sustainability and transparency in Pakistan.

The TA subproject financing amount is $0.9 million which will be financed on a grant basis by the ADB’s Technical Assistance Special Fund (TASF 7), revealed official documents.

The government will provide counterpart support in the form of counterpart staff, office accommodation, office supplies, secretarial assistance, domestic transportation, and other in-kind contributions.

The TA will have the outcome including, debt sustainability and transparency in Pakistan improved. ADB will build on its longstanding policy dialogue with the Government of Pakistan on debt management to ensure that the proposed TA subproject will promote increased sustainability and transparency in Pakistan’s borrowing practices. In order to support this overarching objective, the TA rests on three interrelated outputs: (i) implementation of the Sustainable Development Finance Policy (SDFP); (ii) fiscal risk management practices strengthened; and (iii) public debt recording, management and reporting strengthened.

The bank stated that while Pakistan’s public debt is assessed as sustainable, macro-fiscal shocks, including changes in primary and fiscal deficits, real interest rate movements, and exchange rate depreciation, continue to pose a risk to debt sustainability in Pakistan.

The ADB’s support for debt sustainability will be strengthened by aligning with the SDFP principles of the International Development Association (IDA). One of the pillars of SDFP is a debt sustainability enhancement program, which creates additional incentives for countries to move toward sustainable development financing. The ADB’s SDFP seeks to improve debt transparency and debt management capacity in Pakistan linking specific reforms to future concessional resource allocations. Under the SDFP, the ADB has promoted policy reforms that help mitigate the adverse effects of debt accumulation through improved macro-fiscal policy frameworks, strengthened domestic resource mobilization, more efficient spending of scarce fiscal resources through improved public financial management systems, and strengthened institutional capacity for debt management. The ADB is also monitoring IDA’s SDFP implementation in close collaboration with the Government, IDA and the IMF.

During its first year of implementation, Pakistan managed to implement all but one policy action, leading it to set aside 10 per cent of its concessional resource allocation from the ADB.

It further noted that exposure to fiscal risks represents a significant threat to fiscal stability in Pakistan. The materialization of risks that are unaccounted for threatens credibility of the medium-term budget framework. Failure to identify, mitigate, manage, and disclose exposure to fiscal risks results in unanticipated government liabilities which, in turn, threatens fiscal stability and debt sustainability.—TAHIR AMIN