ADB to approve four projects of over $700 million next week

World Bank says Pakistan’s economic growth
will accelerate; dwindling exports, stagnant
investment remain major challenges

ISLAMABAD: The Asian Development Bank (ADB) will approve four projects worth more than $700 million for Pakistan next week in energy and water sectors and establishment of the Pakistan National Disaster Management Fund, the bank’s country director said on Monday.

The ADB’s country director for Pakistan, Werner E Liepach, said, “These four projects will be approved next week with a combined loan of more than 700 million dollars. Next week will be a big week, as these projects will get approval in three days in a row on November 23 to 25, 2016.”

The projects he mentioned include Pehur High Level Canal Extension Project (formerly Khyber Pakhtunkhwa Water Resources Project); Access to Clean Energy Investment Programme in KP and Punjab, Supporting Public-Private Partnership Investments in Sindh and establishment of National Disaster Risk Management Fund. 

The Pehur High Level Canal Extension Plan (PHLCEP) would irrigate around 200,000 acres of arid land in KP, especially in Swabi district. This project also includes construction of small dams in the province. The project was proposed by the KP government and is in line with the Country Partnership Strategy, which includes water and irrigation as one of the core sectors, and focuses on the expansion of irrigated agriculture as well as the rehabilitation of irrigation systems. 

Under the Public-Private Partnership Investment programme, the bank’s resources will be pooled with the institutional and financial resources of Sindh to develop and implement a pipeline of fiscally-responsible, development-relevant PPP projects.

The inclusion of private sector in development projects will help the province in bridging the infrastructure gaps and creating new jobs, which will have a positive impact on the country’s overall economy.

Another project, Access to Clean Energy Investment Programme, will help the KP and Punjab to achieve increased access to sustainable and more reliable electricity services for vulnerable communities. This programme will include expanding access to renewable energy, notably micro-hydropower (MHP) plants in rural off-grid areas of KP and decentralised solar plants for education and primary healthcare facilities (PHFs) in KP and Punjab; providing women and girls with increased opportunities to obtain energy services and benefits; enhancing institutional capacity to foster sustainability and promoting public sector energy efficiency in Punjab.

The ADB will also approve project for establishment of the Pakistan National Risk Disaster Management Fund to strengthen the country’s disaster resilience, emergency response and reconstruction capacity.

Since Pakistan was vulnerable to natural hazards including droughts, earthquakes, floods and cyclones, this project was very crucial. After implantation of the project, the government will save millions and billions of dollars, the country director said. 

It is worth mentioning that three major floods 2010, 2011 and 2014 had affected more 30 million Pakistanis resulting in $14 billion damages and losses. The 2005 major earthquake caused more than 73,000 deaths and $5 billion in losses. Besides, a major cyclone in 2007 and drought in 2015 also affected millions of Pakistanis.

In the meantime, the World Bank’s Enrique Blanco Armas, Lead Country Economist Macroeconomic and Fiscal Management, told a group of Islamabad-based journalists here that Pakistan’s economic growth in financial year 2016 strengthened and was expected to accelerate in financial years of 2017 and 2018, but falling exports and stagnant investment rates remain challenges for Pakistan’s economy. Investment rate of Pakistan was well below the average of South Asian average. 

Armas said Pakistan should focus on improving trade competitiveness, trade facilitation, logistics and infrastructure to increase its exports. He highlighted Pakistan’s success in reducing poverty over the last decade and a half, but contrasted this with the lack of progress in health, education and nutrition outcomes since 2010. He said that growth was expected to be driven by public and private consumption.

He further observed that a moderate increase in investment was also expected, from 14 percent of GDP in FY 2016 to 14.6 percent in FY 2018. The services sector was expected to continue to drive growth, current account deficit was expected to widen but financial flows will continue to support reserve build up, he said. He projected that the pace of Pakistan’s economic growth would accelerate to 5.4 percent in FY 2018.

A moderate increase in investment (related to CPEC projects) is expected to contribute to an acceleration of growth, which would continue to be driven by public and private consumption. Like others in South Asia, Pakistan’s growth was driven by domestic consumption that continues to compensate for weak global demand.