Islamabad:
The Asian Development Bank (ADB) has postponed the approval of a $ 800 million financing package to Pakistan for five days at the request of India, who sought time to evaluate the loan documents and postpone deficiencies in the lender’s rule book that allows such extensions.
Government officials told The Express Pakinomist that the ADB board meeting had been summoned to May 28 to approve the $ 300 million budget support loan and another $ 500 million in guarantees to get foreign commercial loans.
The meeting did not take place on Wednesday and Pakistan had been informed in advance. The meeting has been re -planned for June 3rd, the government officials added.
When contacted, financial affairs confirmed, dr. Kazim Niaz that the ADB board meeting was scheduled for May 28, but has been postponed for five days at the request of the Indian CEO.
The secretary said that any director can seek a one-time expansion on the date under the ADB rules and India gave the benefit of this rule. ADB Country Office did not respond to a request for comment on the development.
The Indian step came after it could not block the approval of the second loan of $ 1 billion to another loan of the International Monetary Fund. The ADB exposure emphasizes that the Pakistani representatives of the World Bank, the IMF, the Asian Infrastructure Investment Bank and ADB have to use a proactive approach to protect the country’s financial interests.
After facing defeat in the hands of the armed forces on the battlefield, India has begun to lobby against Islamabad’s financial interests. The five-day postponement has not affected Pakistan’s external financing plans, and the money is expected to flow into the central bank’s accounts after the board’s approval on June 3.
Independent economic analysts say the government should reduce its dependence on the foreign loans, especially on budget support loans. ADBS package of $ 800 million is not intended for any developmental purposes, and the money and guarantees will be used to build the currency reserves.
Dr. Niaz said there was no lapse on part of the federal government or its nominees on the board when the ADB rules allowed the expansion. He said that when India sought the postponement of the board meeting, the government took up the case at the highest level in ADB.
The management and almost all board directors had supported the vantage point of Pakistan, which resulted in taking the next date to the board meeting, the secretary said.
Pakistan’s view was that the international forums cannot be used to run the political scores in the member states, he added.
The government had reached an understanding with two foreign business banks for a $ 1 billion loan on the back of ADB’s guarantees due to its low credit rating. The final term and the loan payment is subject to the approval of the ADB’s guarantee of $ 500 million.
Pakistan can borrow up to $ 1.5 billion foreign commercial loan against the $ 500 million warranty, government sources said.
Pakistan’s gross reserves are $ 11.4 billion that the government wants to rise to over $ 14 billion in late June. The reserves will rise on the back of better than expected transfers, $ 1 billion ADB-supported new commercial loan and refinancing of Chinese loans, the sources say.
ADB charges a nominal fee in advance to provide the warranty. Despite a recent rating upgrade, Pakistan’s credit rating still remains low on B -Negative, which is two notches below the investment quality. Fitch upgraded Pakistan from a significant standard risk to a high risk of standard assessment.
For the current financial year, the government has budgeted $ 3.8 billion in foreign commercial loans, but payments remain low due to the low credit rating. China is expected to refinance the commercial loan of $ 3.7 billion by the end of next month.
ADB’s $ 300 million political loan is the second tranche under the resource mobilization program that the government wants to take to improve tax collection of the Federal Board of Revenue. However, there has been criticism for taking loans for purposes that do not require foreign funding.
Pakistan has met all the prior conditions to secure the second loan tranche from ADB.
ADBS spokesman for the local office had been requested to comment on the change in the form of the board meeting and whether ADB may allow its platform to be used by Member States to achieve their political targets.
The people who are interested in ADB’s work said that any member, including Pakistan, can request a delay in two working days to complete more due diligence for any loan.
