Govt refuses WB, ADB loan

By Khalid Mustafa, published in "The News" the 21-oct-2010

ISLAMABAD: In a rare display of defiant courage, the country’s financial managers have turned down a $2 billion loan from the Asian Development Bank (ADB) and another $1 billion loan from the World Bank (WB), which according to sources stunned the ADB in particular as it had already gone ahead with the stage of executive review having taken Islamabad’s erstwhile yes-sir approach for granted.
In the case of the ADB loan, a whopping $50 million portion had been earmarked for the ‘consultants’ alone, who incidentally would have been appointed by the lending institution itself. The multibillion credit lines were meant for the reconstruction of the public sector infrastructure destroyed by the recent floods.

According to sources, Finance Minister Dr Hafeez A Sheikh has conveyed to both the development banks that the government was not interested in using the said loans for the reconstruction of the public sector infrastructure adversely affected by the flood. He told the banks that Pakistan would prefer to use the approximate amount of $1.5 billion to $2 billion, being received from the UN and other sources, for relief and early recovery of the flood-affected areas. “And as far as rebuilding of the flood destroyed infrastructure is concerned, the government shall do it from its own resources,” was the minister’s message according to a source.

Talking to The News, Minister of State for Finance, Hina Rabbani Khar, confirmed that the “government has changed its policy”, under which it will not use the loans offered by the WB and the ADB for the reconstruction of the infrastructure, but would use the other grants of $1.5 billion to $2 billion for relief and early recovery of the masses hit by the flood. She said the federal and provincial governments would divert their resources from the public sector development to reconstructing the infrastructure suffered in the flood-affected areas.

“We have changed our mind following the meeting of the FoDP held in Brussels and meetings with other development partners,” the minister said. However, the federal government, she said, is yet to take the provinces into confidence over its decision not to use the loans of the ADB and the World Bank amounting to $3 billion for the reconstruction phase. “After taking the four federating units into confidence, the final decision will be made to this effect,” she said.

According to a source, in earlier parleys, Islamabad, Khyber-Pakhtunkwha and the Punjab had expressed their opposition to accepting these loans on the offered terms and stated purpose whereas Sindh was the only exception, which supported the loans.

“The government’s decision not to use the loan of $3 billion has really perturbed both the World Bank and the Asian Development Bank, as their targets to market their loans in Pakistan would suffer,” sources in both the banks confided to this scribe.

When contacted, Ismail Khan, who deals with the media in the ADB to confirm as to whether the government had refused to use the credit line of $2 billion offered by the Manila based bank, declined to either confirm or reject the news and only said that the ADB’s country director was not available for comments as he had gone to Manila.