La lecture en ligne est gratuite
Le téléchargement nécessite un accès à la bibliothèque YouScribe
Tout savoir sur nos offres
Télécharger Lire

Program Performance Audit Report

De
39 pages
ASIAN DEVELOPMENT BANK PPA:PAK 22272 PROGRAM PERFORMANCE AUDIT REPORT ON THE AGRICULTURE PROGRAM (Loan 1062-PAK[SF]) IN PAKISTAN October 2000 CURRENCY EQUIVALENTS Currency Unit – Pakistan Rupee (Pre/PRs) At Appraisal At Program Completion At Operations Evaluation (June 1990) (June 1994) (March 2000) SDR1.00 = $1.4308 $1.4190 $1.4342 $1.SDR0.6989 SDR0.7046 SDR0.6973 PRs1.00 = $0.04565 $0.032787 $0.1929 $1.PRs21.9047 PRs30.50 PRs51.85 ABBREVIATIONS ADB – Asian Development Bank ISF – irrigation service fee MFAL – Ministry of Food, Agriculture, and Livestock MFEP – Ministry of Finance and Economic Planning OEM – Operations Evaluation Mission O&M – operation and maintenance PCR – program completion report PIU – produce index unit SCARP – Salinity Control and Reclamation Project SDR – special drawing rights TA – technical assistance tton USAID – United States Agency for International Development NOTES (i) The fiscal year (FY) of the Government ends on 30 June. (ii) In this report, “$” refers to US dollars. Operations Evaluation Office, PE-551 CONTENTS Page BASIC PROGRAM DATA ii EXECUTIVE SUMMARY iii I. BACKGROUND 1 A. Rationale 1 B.Formulation C. Objectives and Scope at Appraisal 1 D. Financing Arrangement 2 E.Program Completion 2 F. Operations Evaluation 3 II. IMPLEMENTATION PERFORMANCE 3 A. Policy Reforms and ...
Voir plus Voir moins


ASIAN DEVELOPMENT BANK PPA:PAK 22272






PROGRAM PERFORMANCE AUDIT REPORT


ON THE


AGRICULTURE PROGRAM
(Loan 1062-PAK[SF])


IN

PAKISTAN





October 2000
CURRENCY EQUIVALENTS
Currency Unit – Pakistan Rupee (Pre/PRs)

At Appraisal At Program Completion At Operations Evaluation
(June 1990) (June 1994) (March 2000)

SDR1.00 = $1.4308 $1.4190 $1.4342
$1.SDR0.6989 SDR0.7046 SDR0.6973
PRs1.00 = $0.04565 $0.032787 $0.1929
$1.PRs21.9047 PRs30.50 PRs51.85



ABBREVIATIONS
ADB – Asian Development Bank
ISF – irrigation service fee
MFAL – Ministry of Food, Agriculture, and Livestock
MFEP – Ministry of Finance and Economic Planning
OEM – Operations Evaluation Mission
O&M – operation and maintenance
PCR – program completion report
PIU – produce index unit
SCARP – Salinity Control and Reclamation Project
SDR – special drawing rights
TA – technical assistance
tton
USAID – United States Agency for International Development



NOTES

(i) The fiscal year (FY) of the Government ends on 30 June.
(ii) In this report, “$” refers to US dollars.







Operations Evaluation Office, PE-551 CONTENTS

Page


BASIC PROGRAM DATA ii

EXECUTIVE SUMMARY iii

I. BACKGROUND 1

A. Rationale 1
B.Formulation
C. Objectives and Scope at Appraisal 1
D. Financing Arrangement 2
E.Program Completion 2
F. Operations Evaluation 3

II. IMPLEMENTATION PERFORMANCE 3

A. Policy Reforms and Institutional Development 3
B. Procurement and Disbursement 9
C. Organization and Management 9
D. Effectiveness of Technical Assistance 9
E. Compliance with Loan Covenants 10
F. Monitoring 10

III. PROGRAM RESULTS 10

A. Agriculture Sector Performance 10
B. Impact of Specific Program Measures 11
C. Institutional Development 13
D.Socioeconomic Impact
E. Environmental Impact and Control 14
F. Gestation and Sustainability 14

IV. KEY ISSUES FOR THE FUTURE 14

V. CONCLUSION 16

A. Overall Assessment 16
B.Lessons Learned 18
C. Follow-Up Actions 19

APPENDIXES 20



BASIC PROGRAM DATA
Agriculture Program (Loan 1062-PAK[SF])


PROGRAM PREPARATION

TA No. TA Name Type Person-Amount Approval
Months Date
1438-PAK Study on Policies for Fertilizer AOTA 20 $300,000 12 Dec 1990
Importation and Marketing


As per ADB
KEY PROGRAM DATA ($ million) Loan Documents Actual
1ADB Loan Amount/Utilization 198.4 198.4


KEY DATES Expected Actual
Fact-Finding 16 Feb-8 Mar 1990
Appraisal 25 May-7 Jun 1990
Loan Negotiations 6-9 Nov 1990
Board Approval 11 Dec 1990
Loan Agreement 14 Dec 1990
Loan Effectiveness 14 Mar 1991 18 Dec 1990
First Disbursement 14 Mar24 Dec 1990
Loan Closing 31 Mar 1993 30 Jun 1994
Program Completion 30 Jun 1993
Months (Effectiveness to Completion) 33.5 42.0

BORROWER Islamic Republic of Pakistan

EXECUTING AGENCY Ministry of Finance and Economic Planning


MISSION DATA
Type of Mission No. of Missions Person-Days
Fact-Finding 1 80
Follow-Up Fact-Finding 1 24
Appraisal 1 105
Program Administration
Program Specific Consultation 1 36
Inception 1 13
Review 4 101
Special Loan Administration 1 1
Program Completion 1 81
Follow-On Program Completion 10 10
Operations Evaluation 1 30

ADB = Asian Development Bank, AOTA = advisory and operational technical assistance, PAK = Islamic Republic of
Pakistan, TA = technical assistance.
1 Released in two tranches and equivalent to SDR139,784,000.
EXECUTIVE SUMMARY
The Agriculture Program loan was approved by the Asian Development Bank (ADB) in
1990 to support the Pakistan Government’s effort to address problems and constraints in the
agriculture sector through economic restructuring and structural adjustment. The major
objectives of the Program were to increase agricultural production and productivity on a
sustainable basis and to raise domestic resources for productive investment in the agriculture
sector. The Program supported a structural adjustment and development program, market-
oriented policies, and private sector participation in agricultural activities with the public sector
providing institutional support. The Program consisted of a series of policy and institutional
reforms to improve production, productivity, marketing, and distribution efficiency, as well as to
ensure equitable distribution of returns and effective management of the agriculture sector. The
scope included (i) progressive adjustment of prices of key agricultural inputs and outputs to
reflect real resource cost, (ii) gradual transfer of certain public sector operations to the private
sector, and (iii) orientation of public sector investment toward rehabilitation and improvement of
existing facilities.
ADB provided a loan of $200 million equivalent from its Special Funds resources to
support the Government program of agriculture sector reforms. The first tranche of $100 million
was released in December 1990 and the second tranche on 17 March 1994. The loan account
was closed on 30 June 1994 after a one-year extension. The proceeds of the loan were utilized
to cover the foreign exchange cost of eligible imported items for the agriculture sector that were
procured from ADB’s member countries, and matching equivalent funds in local currency were
provided by the Government to carry out the program of sector reforms. The Ministry of Finance
and Economic Planning was the Executing Agency and the Ministry of Food, Agriculture, and
Livestock the Implementing Agency. The State Bank of Pakistan was given responsibility for the
administration and utilization of loan proceeds. The task of monitoring and coordination was
delegated to the Economic Affairs and Statistics Division.
The Program constituted the first comprehensive strategy of the Government to address
the most pressing problems encountered by the agriculture sector in the late 1980s. It provided
the Government with financial resources to address severe budgetary constraints and
supported the implementation of a series of policy reforms and strategic adjustments to
revitalize the agricultural economy. The reform measures are highly relevant to removing market
distortions and leading to market liberalization.
Most of the reforms agreed in the Government’s development policy letter were
undertaken. However, the reforms carried out were not comprehensive or adequate, and were
not effectively implemented. Policy reforms on deregulation of the fertilizer subsector were not
completely carried out, although the subsidy on fertilizer import was removed. Private sector
participation in fertilizer import and export, marketing, and distribution is gradually increasing,
but progress has been hampered by active public sector involvement in fertilizer marketing and
distribution. The wheat procurement price was increased but is still significantly below the
international market price. The consumer wheat price subsidy was not eliminated. Fruit and
vegetable exports were not promoted effectively due to lack of support infrastructure. Reforms
to increase the production of edible oils and use of certified, improved seeds were not effectively
carried out. Reforms in irrigation efficiency were adopted, but progress has been slow,
especially in achieving full cost recovery through irrigation service fees. Improving agricultural
output in irrigated areas is dependent on delivery to most farmers of a package of farm practices
focused on improved onfarm water management but this has yet to be realized. Cost recovery iv
of irrigation has increased but is still inadequate; the provincial governments are continuing their
efforts to achieve full cost recovery.

The Agriculture Wealth Tax Act was enacted in 1994 with an associated increase in the
agriculture land produce index that would enhance agriculture sector tax collection. This has
created awareness in rural areas on paying taxes on farm revenues. However, the Program
paid little attention to the institutional capacity to collect tax, and the amount of tax revenue
collected is significantly below that envisaged.
Public expenditure in the agriculture sector declined substantially during the loan period.
Agricultural institutions remain weak with low levels of budget support, and the scope of these
institutions to provide basic services such as research, extension, and regulatory functions have
been impaired.
The Program objectives were too broad, covering a number of issues. Each of these
issues is complex and the proposed changes have ramification for the entire economy. There
was an absence of detailed policy studies showing the likely impacts of the proposed changes.
For example, the removal of the fertilizer subsidy without a full increase in the crop procurement
price to market price resulted in higher fertilizer costs incurred by the farmers. The savings in
fertilizer subsidy have been nullified by the increased expenditure in subsidy to urea
manufacturers and public sector fertilizer agencies.
The policy and development agenda of the Program lacked priorities and performance
indicators, and the implementation arrangements did not provide for good coordination and
cooperation among stakeholders and the concerned institutions, including Government line
agencies. This severely limits opportunities to monitor progress, identify needed adjustments in
the sector program, and conduct an effective policy dialogue between the Government and
ADB. The implementation of policy reform has not been effective.
The agriculture sector has been performing below expectation for the last two decades
and it now appears to be stagnating. The sector grew at an average annual rate of about
3 percent from 1950 to 1997. In recent years (FY1997-FY1999), the average rate of annual
agricultural output has been less than 1 percent. Despite achievements such as the removal of
fertilizer subsidies and an increase in private sector participation in the import and export of
agricultural commodities, many market distortions remain, including low procurement prices for
wheat and oilseeds, high consumer price subsidies for wheat and other commodities, and a
significant involvement of public sector agencies in fertilizer marketing and distribution.
The absence of clear targets in the Program has left both ADB and the Government with
a false sense of achievement in instituting reform. The impacts of the reforms have not been
examined in detail. The emphasis has been on compliance with loan covenants. Overall, the
impact of the policy reforms is not significant. The Program has yet to achieve the ultimate
objective of promoting a free market for agricultural inputs and outputs. Thus, Program efficacy
has been less than satisfactory.
The Government lacked the commitment to adopt strategies and consistent policies in
implementing the Program. It was reluctant to effectively implement politically sensitive reforms,
such as the collection of agricultural wealth tax and removal of consumer price subsidies on
wheat and other commodities. Little support was provided for rural infrastructure facilities,
extension and research, and development. Program sustainability is less likely if the present
situation of weak commitment and inadequate funding continues. v
The Program was overly ambitious in pushing for a wide range of reforms without
considering the institutional capability and the preconditions for effective reform measures. The
Program contained too many reform measures and each of them was treated too broadly to be
effective in bringing about meaningful changes. The sequencing of the reforms was poorly
thought through. There was an absence of clear targets to be achieved within a time-bound
policy framework. However, the Program demonstrated the value of, and benefits arising from,
close cooperation between the Government and ADB in designing and implementing important
sector programs. Although many reform measures were inadequately carried out, there is now a
basis for further strengthening the reforms with strong Government commitment. In view of the
many constraints in implementation, weaknesses in program design and the mixed results, the
Program is rated less than successful.
Future policy reforms to be pursued by ADB should be specific, prioritized, and focused
on a few specific and relevant issues pertaining to ADB’s strategic objectives in the country. The
central thrust of any future program should be on a greater reliance on market forces and
reforms that aim to correct distortions, such as the removal of subsidies and increase in
agriculture operational efficiency. An important lesson is that implementing a program in a
highly traditional society (with politically well-connected landholders and vested interest groups)
and in a country with poor governance, requires a step-by-step approach and a long-term
commitment. It would be better to disburse the loan over a longer period of 5-10 years, with the
disbursement conditional on introducing and implementing reforms that would lead to market
liberalization. If such an approach had been followed, a constituency of support could have
evolved, reflecting civil participation in the process. It would also have encouraged ongoing
policy dialogue, and facilitated adjusting the policy matrix to gain better sequencing of the
reform measures.
Reform measures that have significant political and social implications need to be
carefully assessed and analyzed to determine the Government’s commitment, institutional
capability, good governance, and strong political will to implement such measures. It is futile to
include such reform measures in the Program if the Government is weak and does not have the
capability to implement the proposed measures.


I. BACKGROUND
A. Rationale
1. In 1988, the Government of Pakistan adopted a medium-term economic adjustment
program to reduce the role of the public sector in agriculture and encourage the private sector to
assume greater responsibility in promoting agricultural development. The public sector role was to
be confined to the formulation of policy and the provision of basic institutional and infrastructural
support. The key thrust of this program was to adopt market-oriented policies and encourage
private sector participation in agricultural activities. Government policy would support the private
sector by ensuring the availability of major inputs such as seeds, fertilizer, and water; providing
incentives to produce crops that save foreign exchange, such as wheat and oilseed; and
encouraging the expansion of new exports such as fruits and vegetables. A reduction in
Government subsidies and an expanded revenue base would generate resources for investments
in the physical and social infrastructure necessary for continued growth in the agriculture sector.
The increased role of the private sector would enhance the efficiency of the economy and create
new jobs. This program was in line with the strategic objectives that the Asian Development Bank
(ADB) had in Pakistan and formed the basis of the Agriculture Program loan.
B. Formulation
2. In October 1988, the Government asked ADB to support the medium-term economic
adjustment program. The following year ADB conducted an agriculture sector review to update its
lending strategy for Pakistan. Following a policy dialogue between ADB and the Government, the
Appraisal Mission visited Pakistan from 25 May to 7 June 1990 to assess the appropriateness and
adequacy of the Government’s proposal as a basis for ADB’s assistance to the agriculture sector.
The Mission reached an understanding with the Government on major aspects of the sector
program, and the terms and conditions of the loan. A development policy letter was signed in April
1990 outlining the Government’s proposal for a structural adjustment and development program for
the agriculture sector. The Program consisted of a series of policy and institutional reforms to (i)
improve production, productivity, marketing, and distribution efficiency; and (ii) ensure an equitable
distribution of returns and the effective management of the agriculture sector.
3. In processing the Program loan, ADB consulted with other aid agencies such as the World
Bank and the United States Agency for International Development (USAID) to promote consistency
in program considerations, covenants, and conditionalities. Coordination with these agencies was
particularly close with respect to the identification and formulation of needed sector reforms. The
Program complemented the World Bank’s agriculture sector adjustment loan and USAID’s
agricultural sector support program.
C. Objectives and Scope at Appraisal
4. The major objectives of the Program were to increase agricultural production and
productivity in Pakistan on a sustainable basis, and to raise domestic resources for productive
investment in the agriculture sector through the implementation of appropriate policy reforms. The
Program focused on (i) improving the availability of major agricultural inputs through increased
private sector participation, (ii) ensuring that private sector investment focused on programs and
projects that had a major impact on productivity and production, and (iii) providing production
incentives for selected crops. The Program emphasized on (i) expanding the base for direct
taxation of agricultural income; (ii) eliminating subsidies on major agricultural inputs, particularly
fertilizer and irrigation; and (iii) eliminating consumer subsidies on selected agricultural
commodities. The goal was to move toward market-based pricing of agricultural inputs and
outputs.
5. Specific measures to be implemented under the Program included (i) eliminating subsidies
on fertilizer imports and encouraging the private sector to assume a major role in fertilizer import
and marketing, (ii) encouraging private sector participation in the production and marketing of
improved seeds, (iii) ensuring that waterlogging and salinity control be accorded high priority, (iv)
raising the procurement prices of major farm produce to bring them in line with border prices, (v)
increasing the production of nontraditional oilseeds by providing farmers with higher prices to
reduce the import of edible oils, (vi) adopting export-oriented policies and strengthening the role of
the private sector in the federal and provincial fruit and vegetable boards, (vii) increasing
Government revenue from the agriculture sector by removing tax exemptions on income from
agriculture and agriculture-related businesses, (viii) improving the assessment and collection of
irrigation service fees (ISF) to ensure full recovery of operation and maintenance (O&M)
expenditures, (ix) eliminating wheat consumer subsidies and encouraging the public sector to play
a greater role in the transport of wheat and flour, and (x) increasing public and private sector
investments in agriculture.
D. Financing Arrangement
6. On 11 December 1990, ADB approved a loan for SDR139.784 million ($200 million
equivalent) from its Special Funds resources to support the Government’s program. The following
day, ADB approved a technical assistance (TA) amounting to $300,000 for a study of policies for
1deregulation of fertilizer import and marketing. The loan became effective on 18 December 1990.
7. Counterpart funds generated from the loan proceeds were to be used to finance the local
currency costs of ongoing ADB-funded and other development projects, particularly in rural areas.
The proceeds were used to cover the foreign exchange cost of eligible imported items for the
agriculture sector that were sourced from ADB’s member countries.
E. Program Completion
8. The loan was closed in June 1994. A program completion report (PCR) prepared by ADB’s
Agriculture and Social Sectors Department (West) dated 3 May 1996, discussed the depth, scope,
implementation, and operational aspects of the Program. The PCR considered the Program as
partly successful. Although there were successes and shortcomings in the various policy reforms
pursued, it was concluded that the positive impact outweighed the negative impact. The PCR
commented that the complete deregulation of the fertilizer and edible oil industries, the reduction in
fertilizer subsidies, and the removal of the wealth tax exemption on agricultural land were among
the major achievements of the Program. Progress on irrigation cost recovery and the removal of
support price/consumer subsidy for wheat and other agricultural commodities was disappointing.
9. The PCR was a fair judgment of the achievement of various policy measures, and
particularly the removal of the fertilizer subsidy and market price liberalization. After accepting the

1 TA 1438-PAK: Study on Policies for Fertilizer Importation and Marketing, for $300,000, approved on 12 December
1990.
recommendations of TA 1438 (footnote 1) to completely deregulate the fertilizer industry, including
the removal of subsidies (para. 13), the Government resorted to an interim one-time subsidy in
October 1995 because of the high price of fertilizer in the international market. Although the interim
subsidy was only $4.8 million, compared with $47.08 million prior to the Program (Appendix 1,
Table A1.1), the PCR noted that this was not in conformity with the policies supported by the
Program and could create an undesirable precedent. The PCR recommended that such subsidies
should be discontinued.
10. Overall, the PCR provided good evaluative analysis of the progress and achievement of
various reform measures at the time of program completion. The partly successful rating of the
PCR is supported with a balanced evaluation of the positive and negative aspects of the reforms
introduced under the Program. However, the PCR did not discuss the relevance and adequacy of
the reforms, and the analysis is not detailed enough to judge the effectiveness and impact of the
measures.
F. Operations Evaluation
11. This program performance audit report focuses on the policy reforms that formed part of the
Program and presents the findings of the Operations Evaluation Mission (OEM) that visited the
country from 27 February to 16 March 2000. The report also presents an assessment of the
Program’s effectiveness in achieving its objectives, generating benefits, and ensuring the
sustainability of the reform measures. It examines the relevance of the Program’s policy initiatives,
and the effectiveness of the policy reforms carried out during program implementation. It is based
on (i) a review of the PCR and loan documents; (ii) materials in ADB files; and (iii) discussions with
ADB staff, the officials of the Ministry of Finance and Economic Planning (MFEP) and other
Government agencies, and representatives of aid agencies, research organizations, the private
sector, nongovernment organizations, and farmers groups.
II. IMPLEMENTATION PERFORMANCE
A. Policy Reforms and Institutional Development
1. Removal of Fertilizer Subsidies
12. The Program policy conditions for the compete removal of fertilizer subsidy have been
complied with. There was, however, a three-year delay in the complete removal of the fertilizer
subsidy, achieved in mid-1995 instead of mid-1992. This delay was due mainly to the sharp
increase in imported fertilizer prices brought about by the devaluation of the Pakistan currency in
FY1993. In that year, the Government provided a subsidy of about PRs810 million, about one third
of the average annual fertilizer subsidy incurred in the late 1980s (Appendix 1, Table A1.1).
13. Government expenditure on the fertilizer subsidy declined from about PRs2.4 billion in
FY1989 to about PRs50 million in FY1996 and this subsidy was terminated after FY1996. This
elimination of fertilizer subsidy was a successful aspect of the Program. Following the reduction
and eventual removal of the subsidies and the increase in the retail prices of fertilizers, total
fertilizer consumption has remained relatively stagnant from 1996 to 1999 (Appendix 1,
Tables A1.2 and A1.3).

Un pour Un
Permettre à tous d'accéder à la lecture
Pour chaque accès à la bibliothèque, YouScribe donne un accès à une personne dans le besoin