The Asian Development Bank (ADB) has advised Pakistan to reduce subsidies on fuel and power to take full advantage of lower international oil prices and take steps to make the economy more energy efficient.
“This is a good opportunity for Pakistan to reduce fuel and power subsidies and make energy and economy more efficient,” said ADB President Takehiko Nakao in his concluding news conference after 4-day 48th annual meeting of the board of governors.
He said the low-income heavy oil import countries face high costs of energy particularly when they subsidise fuel and power as it becomes “a very big burden” on countries like Pakistan in terms of trade financing and the budget.
He said low oil prices were good for low-income countries but they also mean lower taxes hence creating challenges along with opportunities.
Therefore, he said, Pakistan should take advantage of low oil prices which could be a boon but how you use this opportunity would be more critical.
He said the board of governors of the ADB agreed to continue its focus on poverty reduction and inclusive growth as Asia and the Pacific still about 1.4 billion people, or 40 per cent, of the regions population living in absolute poverty.
Responding to a question, Mr Nakao said the ADB would continue to be important and relevant unless poverty was completely eliminated and huge infrastructure gap in the region was overcome.
He also noted increasing inequalities in some countries in the region but declined to name them saying with faster GDP growth rates such issues were very common as skilled people get improved lifestyles.
He said the challenge would need to be addressed as continued economic growth supported by sound macroeconomic policies and structural reforms would be key to poverty reduction and squarely address the issues of quality of growth and inclusiveness.
He said the bank would increase support for education and health and climate change and help improve governance and capacity of member countries to deepen financial inclusion and enhance food security and agricultural productivity.
Mr Nakao said while the ADB would increase support to infrastructure in lagging areas, it will encourage countries to improve safety and conditions in the work place.
The governors accepted the invitation of Germany to hold next year annual meeting of the ADB in Frankfurt in May 2016.
The ADB chief did not agree that global economy was in a crisis situation, saying the US economy was expected to grow by three per cent and Japan and eurozone by over one per cent.
He declined to respond to a question why Armenia was the only country among the 67 ADB members to stay away from the meeting, saying this should be referred to Armenian government. Observers said the Armenia-Azerbaijan hostilities over Nagorno-Karabakh was the reason.
He said the board of governors also emphasised the important role of infrastructure in promoting growth and reducing poverty and therefore, the ADB would do the job by adhering to the best international practices on environmental and social safeguards, and open, competitive procurement.
He kept on reminding on repeated questions that ADB and China-sponsored Asian Infrastructure Investment Bank would complement each other and not compete because the infrastructure gap would be in trillions of dollars while ADB had a limitation of around $20 billion and even if AIIB added another $20bn a year, it would just be $40bn. “So the ADB and AIIB would also be co-financing infrastructure projects without reducing safeguard standards for environment, procurement and social protection.
He said the member countries also emphasised and the ADB agreed to continue promoting regional cooperation and integration given its track record and would encourage connectivity and trade between sub-regions. This would be important for tariff reduction, trade facilitation, and sound macroeconomic policies, while harmonising standards for labour market and financial regulations.
Nakao said that on the demand of members for tapping private resources for development and promoting the private sector, the ADB would substantially expand non-sovereign operations and strengthen assistance for public private partnerships (PPPs) by establishing a dedicated unit to support PPPs. He said the ADB would also consider how to best channel remittances for productive activities.
He said the recent tragedy in Nepal and some other countries underscored the regions susceptibility to natural disasters and hence ADB will further strengthen resilience and support disaster risk management through innovative disaster risk financing instruments such as disaster insurance.
He said the ADB may have to ask members for support to capital increase in future to meet large financing needs in infrastructure, health, education and climate change sector.
He said the ADB had decided to delegate more authority to resident missions in respective countries for project financing to reduce approval time at the Manila headquarters, to become a stronger, better and faster institution.