The Ministry of Economic Affairs has responded to recent news items and articles published in the press regarding the Government of Pakistan’s payment of a $100 million fine to the Asian Development Bank (ADB) on incomplete projects.
The ministry clarifies that the claim for payment of $100 million to ADB as a “fine” is baseless and misleading. The Government of Pakistan has paid only $15.98 million to ADB as a commitment fee over the last 15 fiscal years. Secondly, the term “fine” has wrongly been used by the media, rather a commitment fee is paid by the Government of Pakistan to the lending agencies against market-based loans, it said in a statement.
The ministry explained that the commitment fee is levied on the borrower by the lender on unused credit. All international financial institutions apply commitment fees as part of their lending modalities to the borrowing member countries. ADB applies a standard flat commitment fee of 15 basis points on the undisbursed loan balances on its market-based loans. It may be noted that disbursement of funds depends on the implementation period and physical progress of any development project which is 4-5 years on average. Therefore, all funds cannot be disbursed immediately.
The present government is committed to reducing the transaction costs and improving the performance of the slow-moving foreign-funded projects. On the direction of the Prime Minister, the Ministry of Economic Affairs constituted a National Coordination Committee on Foreign-Funded Projects (NCC-FFP) in September 2020 under the chairmanship of the Minister for Economic Affairs. The Committee since its inception has reviewed 222 projects worth $31 Billion under the bilateral and multilateral ongoing portfolio and considerable improvement has been made in the performance of 41 slow-moving projects.
The Economic Affairs Division concluded that under the ADB portfolio, only 4 out of 35 ongoing projects were termed as slow-moving under the NCC-FFP. Due to continuous follow-up of NCC-FFP with the concerned executing and implementing agencies, ADB in its recent trilateral portfolio review has projected that these 4 projects, including the Jamshoro Power Project, will be “on-track” by December 2021. Slow progress on the Jamshoro Power Project was not due to slow physical progress but delayed submission of external environment monitoring report to ADB. This issue has also been addressed.