India Signs Agreement with ADB of US$200 Million to help Punjab
New Delhi: An agreement has been signed here today with Asian Development Bank (ADB) for a loan of $200 million to facilitate the State of Punjab to implement a comprehensive fiscal consolidation programme. This will generate fiscal savings and make better use of scarce budgetary resources and thereby help with socio-economic development of the State.
The Agreements were signed by Shri Tarun Bajaj, Joint Secretary, Department of Economic Affairs, Ministry of Finance on behalf of the Government of India; Ms. M. Teresa Kho, Country Director on behalf of ADB; and Mr. Jaspal Singh, Secretary (Expenditure), on behalf of the Government of Punjab.
The program will provide necessary support to the state government to improve fiscal management, rationalize spending, and introduce new revenue measures. Among these measures will be a plan for improved targeting of public expenditure in the areas of education, health, public works and power; new revenue stream initiatives; the establishment of a fiscal policy and management unit in the state finance department, and the development of fiscal responsibility rules.
Speaking on the occasion, Shri Tarun Bajaj, Joint Secretary, Department of Economic Affairs said that the Punjab Development Finance Program will improve targeting of public expenditure in the areas of health, education, power, and public works. Moreover, it addresses environmental issues that are undermining sustainability considerations through direct feedback loops from subsidy to water table depletion.
Ms. M. Teresa Kho. Country Director, ADB said that ADB’s loan will help the state government to introduce reforms which will strengthen finances, encourage fresh investment and free up resources for priority spending needs.
Savings produced are expected to free up extra space for spending in other areas, allowing capital outlays as a percentage of gross state domestic product to rise from less than 1% in fiscal year (FY) 2012 to an expected 2.4% by FY2016. Fiscal savings between FY2014 and FY2018 are expected to reach $766 million.
The loan funds will be released in three tranches as policy milestones are met, with the first amount set at $50 million. ADB is also providing a technical assistance grant of $400,000 to raise the fiscal management skills of key institutions overseeing the reforms. The program will run for about two and a half years with an expected completion date of June 2017.
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