The Asian Development Bank (ADB) has distanced itself from the recent announcement of the government that it was furnishing budgetary support in the amount of $3.4 billion.
The ADB, which rarely comes out independently to comment on government statements, clearly sensed some urgency in the matter, with their country office in Islamabad issuing a statement on a public holiday distancing itself from the government announcement.
The $3.4 billion budgetary support had been announced by two different ministers of the PTI government after meetings with delegates of the ADB. Planning and Development Minister Makhdum Khusro Bakhtyar made the announcement in a presser, and was followed by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh on twitter.
After holding a meeting with Werner Liepach, the ADB director general, Dr Shaikh said that consensus had been reached and “The ADB will provide $3.4bn in budgetary support to help with reforms and stabilisation of the economy.”
He went on to say that the ADB was going to “release $2.2bn this fiscal year, starting in the first quarter of FY2019-20. This will help the reserve position and the external account,” adding that “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, while confirming that the meeting did indeed take place, the statement from the ADB did not put a number to the budgetary assistance and indicated that negotiations were still not over. “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.
It appears that the ADB has been embarrassed by an easily excitable government set-up, which prematurely made the announcement even before the bank had taken it up with their Board of Directors. Coming out with a statement as they did was a major break from precedent for the ADB and is quite an uncharacteristic and volatile reaction, indicating that the government’s announcement has done them no favours.
Media reports have also indicated that 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 had been stated almost a month ago by ADB President Takehiko Nakao early, who linked 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.