development projects

Pakistan paid $100 million fine to ADB in last 15 years for failing to implement projects


Pakistan has paid the Asian Development Bank (ADB) a whopping $100 million in penalties for failing to complete several donor-funded projects within the allowed timeframe during the last 15 years.

The publication detailed a few examples of poor governance in the implementation of donor-funded projects in the country, for which the country’s hard-earned foreign exchange reserves of almost $100 million were paid by  governments since 2006.

Read more: Pakistan to pay $2.2 million for not using $400 million ADB loan

ADB Imposes 0.15% Amount As Commitment Charges

“The ADB imposed a commitment charge of 0.15 percent on signed projects if the executing agencies failed to deliver on project implementation within the prescribed timeframe and the committed loan amount was not disbursed,” top official sources confirmed.

Another senior official stated that the distinction between legitimate and illegitimate commitment charges must be made. If the project’s execution is delayed, the executing agencies may be held liable for paying a large sum in the form of commitment charges.

Jamshoro Power Project

Official sources mentioned several examples of bad governance, such as the ADB’s approval in 2014 of roughly $900 million for the Jamshoro Power project, which will generate 660MW of power using supercritical coal fire technology. By 2019, the project was estimated to be completed in five years.

The project’s cost was cut from $900 million to roughly $660 million as a result of the savings. However, this ADB-funded project will not be completed until the year 2021 comes to a close. As a result of the ADB’s failure to distribute more than half of the funds, a total of $313 million, Islamabad is compelled to pay the penalty as commitment charges.

Smart Meter Project

Another example is the ADB-funded smart metering project, which was approved by the Manila-based lender in 2015-16 but could not be implemented until recently.

According to official working related to payment of commitment charges paid out to the ADB, Pakistan paid $8.5 million in the year 2006 on account of sovereign and non-sovereign loans penalty, $8.4 million in 2007, $8 million in 2008, $9.4 million in 2009, $9 million in 2010, $7.6 million in 2011, $6.3 million in 2012, $4.2 million in 2013, $3.4 million in 2014, $5 million in 2015, $4.4 million in 2016, $5.3 million in 2017, $5.5 million in 2018, $5.8 million in 2019, $5 million in 2020 and $2.3 million till June 2021.

In the last 15 years, it is estimated that the entire amount might have reached $100 million by November 2021.

However, the ADB’s loan portfolio continued to encounter major design and implementation issues, and it was unable to insulate itself from the backdrop of Pakistan’s turbulent political economy, according to its own assessment of the latest Country Partnership Strategy (CPS) from 2015 to 2019.

The present IMF-led financial rescue of the Pakistani government comes amid rising public anxiety about foreign debt levels and governance difficulties, as well as the recent onset of a worldwide recession and the impact of the COVID-19 pandemic.

In this context, the ADB must pay special attention to external debt sustainability and the quality of its lending in terms of project design and programme integrity.

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