ADB unveils US$2 .4b assistance to Pakistan

Islamabad (Agence France-Presse): The Asian Development Bank on Monday unveiled a three-year US$2.4 billion assistance package for Pakistan, which ADB country director Marshuk Ali Shah said would largely target poverty reduction.

Shah told a press conference that nearly 60 percent of the funds — to be disbursed from 2003 to 2005 — have been earmarked specifically for programs that will have a direct impact on poverty reduction, particularly in rural areas.

"In future we will be concentrating on seven key sectors: agriculture and rural development, energy... transport to strengthen intersectoral linkages and market access, financial reforms including micro and rural finance, health and education, water supply and sanitation ... and better governance," he said.

The ADB said improved governance was the key issue in reducing poverty in Pakistan, and warned that a full disbursement of approximately $800 million each year between the end of 2000 and 2005 would depend on continued progress toward that end.

ADB senior economic advisor Naved Hamid said the number of Pakistanis living below the poverty line in this Islamic nation of about 145 million people rose from 26 percent in 1993 to 32 percent in 1999 and had since likely increased further.

"We feel that poor governance has increased poverty on three levels. Firstly in terms of macroeconomic management ... more resources are going for debt servicing and defense, leaving very little for social and economic development," he said.

"Secondly, we feel that poor governance has impacted on the state of law and order and this has resulted in heightened uncertainty and in lower rates of investment in the private sector.

"Thirdly, in terms ... of where the government is responsible for the provision of social services to the poor, (unsatisfactory) governance has resulted in inefficient and ineffective service delivery in education and medical services," Hamid said.

ADB country director Shah said, however, the three-year military government of President Pervez Musharraf had shown a strong commitment to improving government performance.

"You have to give credit where credit is due. Since 1999 it has come up with an economic recovery program and over the last two-and-a-half years it has stuck to that program," Shah said.

"This country has achieved a high degree of macroeconomic stability. Your reserves position is comfortable, inflation has come down ... and other economic indicators have stabilized.

"But the events of September 2001 have threatened this ... and this is why we have decided to come in and assist with such a substantial level of assistance," he said.

In general terms, Shah said, the objective of the aid package was to expand employment for the poor, address growing financial inequalities between men and women, improve environmental protection and promote regional economic cooperation by improving transportation networks with Afghanistan and the Central Asian Republics.

He said continued tensions with India had forced Pakistan and the ADB to look to Pakistan's western and northern neighbors for better trade flows.

"You have to take the geopolitics into account. Although we are working on the eastern (Indian) border, our principal effort is on the western border where we feel we will be able to achieve better progress," Shah said.