ADB-Pakistan Partnership

Workers at the construction site of the Faisalabad-Gojra subway in Pakistan, a project funded by the Asian Development Bank and the country's government. Through 2019, the financial institution will be focusing support on improving necessary infrastructure in the Asian country to improve connectivity, productivity and access to markets and public services. Photo by: Asian Development Bank / CC BY-NC-ND With its abundant natural resources, fertile land, rich biodiversity and young population, Pakistan has considerable potential for rapid development. But issues such as macroeconomic instability, inadequate infrastructure and commodity, limited access to finance, and weak governance constrain its growth. Pakistan is also vulnerable to external shocks and natural disasters. Averaging at 3.5 percent, growth of Pakistan’s gross domestic product is not enough to make an impact on poverty and socio-economic development. Even if the proportion of those living below the poverty line has been decreasing for years, for instance, half of the population is still at risk of falling back into poverty. What the South Asian country needs now is higher, inclusive and sustained growth that will generate employment for its expanding labor force. The government of Pakistan launched its 4Es framework — energy, economy, extremism and education — to address the major development constraints and to work toward its 2025 vision to make Pakistan “a globally competitive and prosperous country providing a high quality of life for all its citizens.” The Asian Development Bank’s 2015-2019 country partnership strategy is anchored to the multilateral institution’s midterm review of its Strategy 2020 and the government’s 4Es agenda. Over the next five years, assistance will focus on six sectors: energy; transport; agriculture, natural resources and rural development; water and other urban infrastructure and services; public sector management; and finance. Funding levels and priorities Pakistan is a founding member of the ADB and since 1966, it has received an estimated $25 billion in sovereign and nonsovereign loans and $200 million in grants. Shown on the chart below is the distribution of ADB’s assistance in Pakistan per sector. Under the current strategy, the bank will provide an indicative resource of $3.65 billion in sovereign loans, $2.44 million of which are market-based ordinary capital resources and the rest are concessional resources from the Asian Development Fund or concessional OCR. The main thrust of the partnership strategy is to improve the connectivity, productivity and access to markets and public services. Infrastructure improvement: ADB will work on promoting a reliable and affordable energy system by rationalizing tariffs, ensuring that subsidies are targeted to low-income populations, reducing transmission and distribution of losses, increasing the supply and access to energy. It will also focus on providing better domestic and regional connectivity to lower trade and transport costs, and provincial roads and an urban transport system to expand access to market jobs and public services. Stronger water resource management and irrigation to improve agricultural productivity will also be a priority, as well as better health and environment for urban residents by expanding their access to safe and improved sanitation. Institutional reforms: To support infrastructure investments, the bank will improve the legal and regulatory setup, develop financing mechanisms, and build the capacity of public-private partnerships. It will also develop long-term financing resources, increase access to finance of underserved segments, and reform public sector enterprises and create a level playing field between public and private companies. Shown on the table are the areas of intervention and allocation per sector under the partnership strategy. Devex analysis ADB is Pakistan’s largest development partner in the energy sector. A quarter of its overall lending is channeled toward energy projects. Under the partnership strategy, the bank will continue its focus on energy, specifically on increasing supply for domestic use (hydropower, renewable energy, coal and gas. The Manila-based institution, along with the World Bank and Japan, will provide around $1.2 billion to implement a sustainable energy sector reform program. But there are risks to implementing this strategy, which the bank does recognize. To address governance issues, for instance, ADB will provide technical assistance to strengthen the capacity of the government and improve its integrity and accountability. In case of disasters, the bank aims to be more responsive to government requests for assistance, and will support the establishment of a government-owned disaster risk agency to enhance the country’s resilience to natural disasters. And given that Pakistan has also been affected by the war in Afghanistan, ADB will continue to be sensitive to the security of the environment and ensure that adequate security measures are in place to protect its people and assets in Pakistan. To continue receiving support from its development partners, Pakistan needs to remain committed to its reform agenda. Its inability to deliver promised reforms recently caused a stir among international partners, resulting in delayed loan approval. On its end, ADB will collaborate closely with other multilateral and bilateral partners to ensure that adequate support is given to help the government implement its reforms, focusing assistance on capacity development. Contact Pakistan Resident Mission Tel: (92- 51) 260-0351 to 69, (92- 51) 208-7300 Fax: (92-51) 260-0365 to 66, (+92-51) 208-7397 to 98 Email: