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Completion Report

Project Number: 41666


Loan Numbers: 2385/2386 and 2547/2548
September 2014

Pakistan: Punjab Government Efficiency Improvement


Program

This document is being disclosed to the public in accordance with ADBs Public Communications
Policy 2011.

CURRENCY EQUIVALENTS
Currency Unit Pakistan rupee/s (PRs)

PRe1.00
$1.00

=
=

At Appraisal
15 October 2007

At Program Completion
26 December 2012

$0.016
PRs60.62

$0.010
PRs97.47

ABBREVIATIONS
ADB
ADP
BCC
CPA
DI&P
DOH
E&TD
GDP
GPF
GPIF
HED
IMF
IPSAS
L&DD
LIBOR
MDG
MPDD
MTBF
MTDF
MTEF
P&DD
PIFRA
PMU
PPCMW
PPF
PPP
PPS
PPSC
PRMP
PSD
RBM
S&GAD
SDR
TA
UIPT

Asian Development Bank


annual development program
budget call circular
core policy area
Department of Irrigation and Power
Department of Health
Excise and Taxation Department
gross domestic product
General Provident Fund
General Provident Investment Fund
Higher Education Department
International Monetary Fund
International Public Sector Accounting Standard
Livestock and Dairy Department
London interbank offered rate
Millennium Development Goal
Management and Professional Development Department
medium-term budget framework
medium-term development framework
medium-term expenditure framework
Planning and Development Department
Project for Improvement in Financial Reporting and Auditing
program management unit
Public Policy and Change Management Wing
Punjab Pension Fund
publicprivate partnership
Punjab Pension System
Punjab Public Service Commission
Punjab Resource Management Program
private sector development
results-based management
Services and General Administration Department
special drawing rights
technical assistance
urban immovable property tax

NOTES
(i)

The fiscal year (FY) of the Government and its agencies ends on 30 June.
FY before a calendar year denotes the year in which the fiscal year ends,
e.g., FY2009 ends on 30 June 2009.

(ii)

In this report, $ refers to US dollars.

Vice-President
Director General
Director

W. Zhang, Vice President (Operations 1)


K. Gerhaeusser, Central and West Asia Department (CWRD)
B. Wilkinson, Public Management, Financial Sector, and Trade Division,
CWRD

Team leaders

A. Mukhamedyarova, Financial Sector Specialist, CWRD


P. Sood, Financial Sector Specialist, CWRD
M. Abro, Senior Project Officer, CWRD
J. Colasito, Operations Assistant, CWRD
A. Gatson, Operations Assistant, CWRD
F. Teves, Project Analyst, CWRD

Team members

In preparing any country program or strategy, financing any project, or by making any
designation of or reference to a particular territory or geographic area in this document, the
Asian Development Bank does not intend to make any judgments as to the legal or other status
of any territory or area.

CONTENTS
Page
BASIC DATA

I.

PROGRAM DESCRIPTION

II.

EVALUATION OF DESIGN AND IMPLEMENTATION

A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
III.

IV.

Relevance of Design and Formulation


Program Outputs
Program Costs
Disbursements
Program Schedule
Implementation Arrangements
Conditions and Covenants
Related Technical Assistance
Consultant Recruitment and Procurement
Performance of Consultants, Contractors, and Suppliers
Performance of the Borrower and the Executing Agency
Performance of the Asian Development Bank

1
3
10
10
11
11
11
12
12
12
12
13

EVALUATION OF PERFORMANCE

13

A.
B.
C.
D.
E.

13
13
14
14
14

Relevance
Effectiveness in Achieving Outcome
Efficiency in Achieving Outcome and Outputs
Preliminary Assessment of Sustainability
Impact

OVERALL ASSESSMENT AND RECOMMENDATIONS

14

A.
B.
C.

Overall Assessment
Lessons
Recommendations

14
15
15

1.

Design and Monitoring Framework

16

2.

Policy Matrix for the Punjab Government Efficiency Improvement Program

19

3.

Effective Gender Mainstreaming Reporting

37

4.

Status of Compliance with Loan Covenants

38

APPENDIXES

BASIC DATA
A.

Loan Identification
1.
Country
2.
Loan Numbers
3.

Program Titles
Loan 2385
Loan 2386
Loan 2547 and 2548

4.

5.

6.

7.
B.

Borrower
Loan 2385 and 2386
Loan 2547 and 2548
Executing Agency
Loan 2385

3.

4.

Punjab Government Efficiency Improvement Program


(Loan for Subprogram 1)
Punjab Government Efficiency Improvement Program
(Technical Assistance Loan)
Punjab Government Efficiency Improvement Program
(Loans for Subprogram 2)
Islamic Republic of Pakistan

Loan 2386
Loan 2547
Loan 2548

Planning and Development Department (P&DD) of


Government of Punjab
P&DD
P&DD
P&DD

Amount of Loan
Loan 2385
Loan 2386
Loan 2547
Loan 2548

$250,000,000
$8,800,000 (SDR5,672,000)
$75,000,000
$75,000,000 (SDR48,298,000)

Program Completion Report Number

1474

Loan Data
1.
Appraisal
Date Started/Completed
Loans 2385 and 2386
Loans 2547 and 2548
2.

Pakistan
Loan 2385-PAK, Loan 2386-PAK, Loan 2547-PAK,
Loan 2548-PAK

Loan Negotiations
Date Started
Loans 2385 and 2386
Loans 2547and 2548
Date Completed
Loans 2385 and 2386
Loans 2547 and 2548

Not applicable
28 June 2009 to 8 July 2009

9 October 2007
21 August 2009
10 October 2007
21 August 2009

Date of Board Approval


Loans 2385 and 2386
Loans 2547 and 2548

10 December 2007
17 September 2009

Date of Loan Agreement


Loans 2385 and 2386
Loans 2547 and 2548

14 December 2007
17 September 2009

A loan fact-finding mission (1631 July 2007) was fielded instead of a loan appraisal mission.

ii

5.

6.

7.

Date of Loan Effectiveness


In Loan Agreement
Loans 2385 and 2386
Loans 2547 and 2548
Actual
Loans 2385 and 2386
Loans 2547 and 2548
Number of Loan Extensions
In Loan Agreement
Loans 2385 and 2386
Loans 2547 and 2548
Actual
Loans 2385 and 2386
Loans 2547 and 2548
Closing Date
In Loan Agreement
Loan 2385
Loan 2386
Loans 2547 and 2548
Actual
Loan 2385
Loan 2386
Loans 2547 and 2548
Number of Extensions
Loan 2385
Loan 2386
Loans 2547 and 2548
Terms of Loan
Interest Rate
Loans 2385 and 2547
Loans 2386 and 2548
Loans 2385, 2547, and 2548
Maturity (number of years)
Loan 2386
Loans 2385 and 2547
Loan 2548
Grace Period (number of years)
Loans 2386 and 2548
Loans 2385 and 2547

8.

Terms of Relending (if any)


Interest Rate
Maturity (number of years)
Grace Period (number of years)
Second-Step Borrower

13 January 2008
17 October 2009
21 December 2007
30 September 2009

None
None
None
None

30 June 2008
31 May 2012
31 March 2010
12 February 2008
26 December 2012
9 October 2009
None
1
None

LIBOR and 0.60% less a credit of 0.40%


1.0% per year during the grace period and 1.5% per
year thereafter
Commitment charge of 0.15% per annum
32
15
24
8
3
None

iii
9.

Disbursements
a.
Dates
i.
Loan 2385
Initial Disbursement
08 January 2008
Effective Date
21 December 2007
ii.

iii.

iv.

b.
Category
i.
ii.

iii.
iv.

Loan 2385
($)
Loan 2386
(SDR)
($)
Loan 2547
($)
Loan 2548
(SDR)
($)

Loan 2386
Initial Disbursement
18 December 2008
Effective Date
21 December 2007
Loan 2547
Initial Disbursement
30 September 2009
Effective Date
30 September 2009
Loan 2548
Initial Disbursement

Final Disbursement
08 January 2008
Original Closing Date
30 June 2008

Time Interval
0
Time Interval
6 months

Final Disbursement
11 December 2012
Original Closing Date
30 June 2012

Time Interval
47.5 months
Time Interval
54 months

Final Disbursement
30 September 2009
Original Closing Date
31 March 2010

Time Interval
0
Time Interval
6 months

Final Disbursement

Time Interval

30 September 2009

30 September 2009

Effective Date
30 September 2009

Original Closing Date


31 March 2010

Time Interval
6 months

Amount
Original
Allocation

Amount
Canceled

Last Revised
Allocation

Amount
Disbursed

Undisbursed
Balance

250,000,000

250,000,000

250,000,000

5,672,000
8,800,000

5,672,000
8,800,000

4,488,571
6,922,514

1,183,429
1,877,486

75,000,000

75,000,000

75,000,000

48,298,000
75,000,000

48,298,000
75,000,000

48,298,000
75,000,000

Category or Subloan
i.
Loan 2385 ($)
Punjab Government Efficiency Improvement
Program-Subprogram 1
ii.
Loan 2386 (SDR)
01 - Equipment
02a - Consultants
02b - Workshops and Training

Original
Allocation

Last Revised
Allocation

Amount Added

250,000,000

250,000,000

644,525
4,105,025
503,249

0
5,105,025
165,049

(644,525)
1,000,000
(338,200)

iv
Category or Subloan

Original
Allocation
19,336

Last Revised
Allocation
14.336

22,275
33,413

10,000
33,413

(12,275)
0

174,022
170,155
5,672,000

174,022
170,155
5,672,000

0
0
0

iii.
Loan 2547 ($)
Punjab Government Efficiency Improvement
Program-Subprogram 2

75,000,000

75,000,000

iv.
Loan 2548 (SDR)
Punjab Government Efficiency Improvement
Program-Subprogram 2

48,298,000

48,298,000

02c - Logistical Support for Studies and


Surveys
02d - Reports and Communications
02e - Misc. Administration and Support
Costs
03 - Interest Charges
04 - Contingencies
Total

Amount Added

( ) = amount canceled, Misc. = miscellaneous.

C.

Program Data
1.

Program and Project Costs

Cost

Appraisal Estimate

Loan 2385 ($)


Foreign Exchange Cost
Local Currency Cost
Total
Loan 2386 (SDR)
Foreign Exchange Cost
Local Currency Cost
Total
Loan 2547 ($)
Foreign Exchange Cost
Local Currency Cost
Total
Loan 2548 (SDR)
Foreign Exchange Cost
Local Currency Cost
Total
2.

Actual

250,000,000
0
250,000,000

250,000,000
0
250,000,000

5,672,000
0
5,672,000

4,488,571
0
4,488,571

75,000,000
0
75,000,000

75,000,000
0
75,000,000

48,298,000
0
48,298,000

48,298,000
0
48,298,000

Financing Plan ($ million)

Cost
Implementation Costs
Borrower Financed
ADB Financed
(i) Loan 2385 ($)
(ii) Loan 2386 (SDR)
(iii) Loan 2547 ($)
(iv) Loan 2548 (SDR)
Total
ADB = Asian Development Bank.

Appraisal Estimate

Actual

1,200,000
250,000,000
5,672,000
75,000,000
48,298,000
SDR 53,970,000
USD 326,200,000

250,000,000
4,488,571
75,000,000
48,298,000
SDR 52,786,571
USD 325,000,000

v
3.
Component

Cost Breakdown by Program and Project Component


Appraisal Estimate

Loan 2385 ($)


Punjab Government Efficiency Improvement ProgramSubprogram 1
Loan 2386 (SDR)
Equipment
Consulting Services
Workshops and Training
Logistical Support for Studies and Surveys
Reports and Communications
Administration and Support Costs
Interest Charge
Unallocated
Total
Loan 2547 ($)
Punjab Government Efficiency Improvement ProgramSubprogram 2
Loan 2548 (SDR)
Punjab Government Efficiency Improvement ProgramSubprogram 2
4.

250,000,000

250,000,000

644,525
4,105,025
503,249
19,336
22,275
33,413
174,022
170,155
5,672,000

0
4,318,269
65,014
10,247
19,586
33,869
41,586
0
4,488,571

75,000,000

75,000,000

48,298,000

48,298,000

Program Schedule

Item

Appraisal Estimate

Actual

None
None
None

May 2009June 2011


September 2007August 2009
May 2009February 2012

Workshops and Training


Logistical Support for Studies and Surveys
Date of Contract with Consultants
b
Equipment and Supplies
b

Actual

No goods were procured under Subprogram 1 and Subprogram 2.

5.

Program Performance Report Ratings


Ratings
Development
Objectives

Implementation
Progress

Loan 2385
From 21 December 2007 to 31 December 2007
From 1 January 2008 to 31 December 2008

Satisfactory
Satisfactory

Highly Satisfactory
Satisfactory

Loan 2386
From 21 December 2007 to 31 December 2010

Satisfactory

Satisfactory

Loan 2547/2548
From 30 September 2009 to 9 October 2009

Satisfactory

Satisfactory

Implementation Period

D.

Data on Asian Development Bank Missions

Name of Mission
Loan 2385/2386
Loan fact-findinga

Date
1631 July 2007

No. of
Persons
Not
available

No. of
PersonDays
Not
available

Specialization of
b,c
Members
Not available

vi

Name of Mission
Inception mission
Follow-up
Consultation
Country contact/consultation
Loan review mission 1
Loan disbursement
Loan review mission 2
Loan review mission 3
Loan review mission 4
Loan review mission 5
Program completion review
Loan 2547/2548
Planning
Country contact/consultation
Loan fact-finding
Loan appraisal
Loan negotiations
Loan review mission 1
Loan review mission 2
Program completion review
a
b

Date
510 May 2008
3 June 2008
1819 September
2008
2428 November
2008
2628 January 2010
28 June2 July
2010
2530 June 2010
1323 July 2010
29 April2 May
2011
2327 April 2012
38 June 2013
59 May 2008
2428 November
2008
24 March3 April
2009
28 June8 July
2009
2122 August 2009
1825 January 2011
718 February 2011
38 June 2013

No. of
Persons
6
1
1

No. of
PersonDays
36
1
2

Specialization of
b,c
Members
a, b, c, d e, f
f
f

10

f, g

2
2

6
10

a, b
h, i

1
4
2

6
44
8

a
d, g, j, k
a, b,

1
3

5
18

b
f, m, t

7
2

35
10

a, c, d, e, n, o, p
l, q

55

a, d, f, m, r

33

f, a, d,

5
4
3
3

10
32
36
18

a, d, l, o, s
a, d, k, l
c, d, f
f, m, t

A loan fact-finding mission (1631 July 2007) was fielded instead of a loan appraisal mission.
a = social security specialist, b = senior public resource management specialist, c = economist, d = economist
(public finance), e = fiscal management specialist, f = project analyst, g = senior economist, h = senior control
officer, i = assistant disbursement analyst, j = senior finance specialist, k = young professional (economics), l =
counsel, m = senior project officer (health and rural development), n = senior private sector development
specialist, o = senior public sector management specialist, p = assistant project analyst, q = senior economist
(fiscal management), r = senior project management specialist, s = financial control specialist, t = financial sector
specialist.
Asian Development Bank Pakistan Resident Mission provided support to the missions in the field.

I.

PROGRAM DESCRIPTION

1.
On 10 December 2007, the Asian Development Bank (ADB) approved the Punjab
Government Efficiency Improvement Program Cluster Subprogram 1 and accompanying
technical assistance (TA) Loan and TA grants for Pakistan. 1 On 17 September 2009, ADB
approved Subprogram 2 of the cluster program.2 The $250 million loan for Subprogram 1 was
released upon loan effectiveness on 21 December 2007. Loans of $250 million each were
envisaged for Subprogram 2 (20082009) and Subprogram 3 (20102011). The loan for
Subprogram 2 was reduced to $150 million and was disbursed upon effectiveness on
30 September 2009. A TA loan of $8.8 million equivalent and a TA grant of $950,000 equivalent
were provided to support the implementation of reforms under the cluster program. In 2011,
ADB programmatic support halted after the International Monetary Fund (IMF) program stopped,
so Subprogram 3 was not processed.3
2.
The cluster program aimed to sustain high levels of economic growth, resulting in lower
poverty incidence and improved public services. The program outcome was greater efficiency in
the allocation of scarce public resources, and greater responsiveness of the government to the
needs of citizens. This outcome was to be achieved through four outputs or core policy areas
(CPAs), with reforms leading to (i) greater performance orientation in planning and budgeting;
(ii) a fully-funded and well-managed civil service pension system that increased the confidence
of civil servants and the public, and generated fiscal space for high-priority investments in the
social sectors; (iii) improved efficiency of the civil service apparatus, with sound incentives and
merit-based appointment and career progression; and (iv) greater private sector contribution to
growth and sustainable publicprivate partnerships (PPPs). The design and monitoring
framework of the program cluster is in Appendix 1.
II.
A.

EVALUATION OF DESIGN AND IMPLEMENTATION

Relevance of Design and Formulation

3.
At the time of formulation in 2007, the cluster program design was relevant. The
relevance of design was contingent on the achievement of the entire cluster. Given that
Subprogram 3 was not processed, the design became less than relevant at completion. Under
the Punjab Resource Management Program (PRMP), which was implemented from November
2003 to August 2007, the provincial government of Punjab introduced wide-ranging reforms in
public resource management.4 It enhanced revenues and rationalized expenditures, improved
planning and budgeting, and introduced elements for private sector development and civil
service reform. In parallel, the provincial government implemented reforms in service delivery
1

ADB. 2007. Report and Recommendation of the President to the Board of Directors: Proposed Program Cluster,
Loan for Subprogram 1, Technical Assistance Loan, and Technical Assistance Grants to the Islamic Republic of
Pakistan for the Punjab Government Efficiency Improvement Program. Manila.
ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loans for
Subprogram 2 to the Islamic Republic of Pakistan for the Punjab Government Efficiency Improvement Program.
Manila.
In October 2011, the IMF terminated its country program with Pakistan, as the government failed to meet its reform
commitments. Thus, the IMF Country Assessment Letter for Pakistana prerequisite for ADBs program loans
was not issued. After continued delays in moving the IMF program forward, ADB and the government mutually
agreed to cancel Subprogram 3 and reprogram the funds to other ADB-financed projects in Pakistan.
ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Islamic
Republic of Pakistan for the Punjab Resource Management Program. Manila; ADB. 2005. Report and
Recommendation of the President to the Board of Directors: Proposed Program Loan and Technical Assistance
Grant to the Islamic Republic of Pakistan for the Punjab Resource Management Program: Subprogram 2. Manila.

2
under the Punjab Devolved Social Services Program5 and in the judiciary through the Access to
Justice Program.6 These ADB interventions and support from other development partners laid a
broad foundation for reform partners in the governance, infrastructure, and social sectors.
4.
Building on these improvements the provincial government launched its secondgeneration reforms at the fourth Punjab Development Forum in April 2007. The government
wished to create a more effective public sector and foster a dynamic private sector to achieve
Punjabs Vision 2020 goals. 7 Key pillars included (i) improving fiscal and public financial
management and instituting a results-oriented medium-term planning and budgeting system; (ii)
establishing a well-funded and adequate pension system; (iii) fostering an efficient civil service;
(iv) fostering dynamic private sector-led growth and publicprivate partnerships (PPPs); (v)
achieving the Millennium Development Goals (MDGs); and (vi) improving access to justice to
enhance legal and regulatory certainty and enforceability in all economic spheres. Along with
the cluster program, the request of the provincial government was to prepare two additional
program clustersthe Punjab Millennium Development Goals Program and the Access to
Justice Program. The principal driver for the three cluster programs was accelerated funding of
the civil service pension system, while leveraging reforms in the respective areas.8 For this, the
government required an infusion of at least PRs100 billion, and it sought about $300 million in
program lending support per year over FY20072011 to address this gap.
5.
The size of the expected budgetary support under the cluster program was viewed as a
strong incentive to address more complex reform measures, in particular for the civil service and
private sector development. Given the complexity of the reforms in these areas and the time
required to filter reforms through the bureaucracy, the program was designed as a cluster,
comprising three single-tranche subprograms. This modality provided adequate flexibility to
meet emerging reform needs and use program conditions for policy reform, rather than as rigid
prescriptions. During the processing of Subprogram 2 good use was made of this flexibility and
some targets were revised to suit the changed economic situation.
6.
The cluster program was designed during a period of rapid economic growth. For the
3 years preceding Subprogram 1, national gross domestic product (GDP) was growing at over
7% annually. However economic conditions have worsened since 2008, with rising world oil and
food prices, global financial turmoil, natural calamities, and a deteriorating domestic security
situation. Growth slowed from 7.5% in FY2007 to 3.4% in FY2009. The rapidly worsening fiscal,
economic, and security situation, together with reduced lending from ADB, required revision of
earlier commitments made. 9 While the government continued to address growing pension
contingent liabilities, more modest targets were confirmed in a revised funding and reform
strategy that also proved to be too ambitious. In early 2008 the political landscape changed,
followed by a 6-month period when the new government reviewed and set its priorities, with
5

7
8

ADB. 2004. Report and Recommendation of the President to the Board of Directors: Proposed Program Loans and
Technical Assistance Grant to the Islamic Republic of Pakistan for the Punjab Devolved Social Services Program.
Manila.
ADB. 2001. Report and Recommendation of the President to the Board of Directors: Proposed Loans and
Technical Assistance Grant to the Islamic Republic of Pakistan for the Access to Justice Program. Manila.
Government of Punjab. 2004. Punjabs Vision 2020. Lahore.
The Punjab Millennium Development Goals Program aimed to improve access, quality, and equity of health
services in the province, especially in relation to MDGs 4 and 5. The Punjab Access to Justice Program was to
improve judicial policy and administration, access to justice, judicial training, legal education and strengthening of
legal profession, commercial dispute resolution and drafting and amending legislation.
The loan size of Subprogram 2 of the cluster program was reduced from $250 million to $150 million, and the
Punjab Access to Justice Program was never processed. Total program lending provided was $650 million against
the original target of $1.5 billion.

3
higher expenditure outlay to counter increased poverty and security risksreducing the
relevance of the targeted high-impact reforms.
B.

Program Outputs

7.
The outcome of the program was to bring about greater efficiency in the allocation of
scarce resources and greater responsiveness to citizens needs.10 The outcome was supported
by four outputs: (i) public resource management modernized and made more efficient; (ii) civil
service pension system made financially sustainable; (iii) civil service efficiency and motivation
enhanced; and (iv) greater private sector participation in economic activity, and a redefined role
for the Punjab public sector. 11 A fifth output, results-based management adopted, was
introduced in Subprogram 2 to help the government to adopt modern public sector management
techniques to achieve its vision. Each output was underpinned by a set of separate policy
actions for each subprogram that needed to be completed before the release of funds. An
analysis of the cluster program is presented in paras. 834. The policy matrix is in Appendix 2.
1.

Output 1: Public Resource Management Modernized and Made More


Efficient

8.
Prior to program start-up, the medium-term development framework (MTDF) and
medium-term budget framework (MTBF) were of poor quality and were not prepared in a timely
manner. They were not fully integrated with the annual development plan (ADP) process and
medium-term expenditure framework (MTEF). The compartmentalized approach to the
preparation of the MTDF and MTBF was an obstacle to effective public financial management.
In the format used prior to the program, the budget call circular (BCC) was not suited to the
integration of the annual budget with the MTBF, as it did not include recurrent budget ceilings
notifications to line departments. 12 On the revenue side, tax administration was one of the
weakest areas, constraining the government from meeting its revenue-generating potential. The
output objective was to improve public resource management through structural reforms in
expenditure management and revenue generation, including MTDF and MTBF integration.
9.
Under Subprogram 1, the Finance Department and Planning and Development
Department (P&DD) adopted joint protocols to ensure greater coordination in planning and
budgeting within central departments and between central and line departments. A rolling MTBF
was adopted for FY2008FY2010, with the aggregate resource envelope defined.
10.
Under Subprogram 2, the Finance Department and P&DD implemented joint protocols to
review consolidated budgets. Provincial revenue targets and expenditure ceilings were
approved by the cabinet through the MTBF for FY2010FY2012. Bottom-up, output-based
budgeting was pilot tested in the Department of Health (DOH) and Department of Irrigation and
Power (DI&P) for FY2010FY2012 to link expenditure with outputs. The Strategic Policy Unit
was created in the DOH and the MTEF Committee was established in the DI&P to define sector
policies and strategies, and to estimate the resources needed to implement these strategies.
The provincial government developed output-based budgets for both departments to the
10

The outcome was restated as an efficient, accountable, and enabling government in the Subprogram 2 RRP.
The four outputs remained the same but the language used to describe the outputs was altered under Subprogram
2, under which the four outputs were (i) improved public financial management, (ii) improved contingent liability
management, (iii) improved civil service management, and (iv) private sector participation promoted. PPPs became
the focus of output (iv) under Subprogram 2.
12
The Budget Call Circular is the key document circulated by the Finance Department to line ministries at the start of
the budget cycle.
11

4
spending unit level, and the exercise was rolled out to another five departments. The annual
budget and MTBF were integrated for the DOH and DI&P for FY2010. Pre-budget consultations
with the provincial assembly were conducted for FY2010, and proposed amendments to rules of
procedure were submitted to the assembly. The MTBF BCC for FY20112012 and FY2012
2013, with instructions on current and development budget ceilings for the pilot MTBF line
departments and deputy district officers, was issued in November 2010 and November 2011 for
two annual budget cycles. Promotion of gender equity was introduced in Subprogram 2 and the
resource allocation for Gender Reform Action Plan implementation was doubled from
PRs70 million in FY2008 to PRs148 million in FY2010.
11.
Prior to the cluster program, fiscal discipline was being compromised by the prevalence
of supplementary grants. Under Subprogram 2, with an increased focus on contingent liability
management, an improved process of applying for supplementary grants was pilot tested in the
DOH and DI&P in FY2010. Justification for supplementary grant requests must now be
submitted in a new, more detailed form. For the DOH, the ceiling for net supplementary grants
has been fixed. Improvements to the quality of the ADP were also made by reducing the
number of unapproved new schemes, through fewer approvals or cancellation. In FY2011,
ongoing schemes with an allocation of less than 10%, and new schemes with an allocation of
less than 15% of the financing needs, were eliminated. The emphasis on tax reform was
reduced under Subprogram 2, and property tax reform was moved to Subprogram 3.
12.
Although Subprogram 3 was not processed, the government complied with indicative
actions, including pre-budget consultations for FY2011 and 2012 budgets; extension of the
MTBF to the Excise and Taxation Department (E&TD), Livestock and Dairy Department (L&DD)
and the Higher Education Department (HED); rationalization and quality improvement of the
2011 ADP; and introduction of gender-responsive budgeting in the DOH and HED. Some
reforms to improve tax revenues and administration were also undertaken. A detailed analysis
of the two major taxesthe urban immovable property tax (UIPT) and motor vehicle taxwas
carried out. For the UIPT, a property tax survey was re-started in 2013 and the updated annual
rental value table was approved by the cabinet. The cabinet also endorsed the reduction of the
UIPT rate and certain exemptions that were in force were removed.
13.
Output 1 was partially achieved, and contributed partially to the program outcome. Some
elements causing greater efficiency in the allocation of resources were developed, including the
capacity of officials to prepare and use MTBFs down to the district level in the seven pilot
departments. 13 At Subprogram 2 completion, expansion of output-based budgeting was
considered to be the driver of reform in expenditure management. Joint protocols have been
adopted for budget review and are being used for coordination between the Finance
Department and P&DD. Transparent planning procedures were stipulated at district level, but
the program objective of greater transparency, predictability and realism in interdepartmental
resource allocation was not achieved. Complete revision, updating, and publication of the
Planning Manual to reduce the number of unapproved schemes has not been done.
14.
MTBF has been implemented in the pilot departments to bring coherence between policy
priorities and development expenditures. Starting in 2011, budget statements were prepared for
seven key departments, department strategic reviews were completed for the MTBF
departments, a medium term fiscal framework was formulated for three cycles, a budget
strategy paper was prepared, with accompanying budget call circular, manual, and monitoring
13

Before the cluster program, implementation of the MTBF had been considered to be beyond the capacity of
provincial government departments.

5
and evaluation framework. Procedures have been put in place and progress is substantial.
However, without province-wide implementation and oversight or public disclosure, the overall
annual budget process is not yet fully transparent or predictable. 14 In expenditure management,
the Finance Department embraced wide-ranging improvements, but tax reforms have not yet
been sufficiently addressed as part of the overall output requirement.
15.
The success of the budgeting pilot tests changed the governments mindset. The pilot
results created confidence that processes could be improved, and serious budget reform could
be initiated in line departments without being engineered and directed by the Finance
Department. However, capacity for MTBF preparation and implementation remains weak, as it
has not been institutionalized and reinforced.
16.
MTBF capacity and skills have been developed and institutionalized in the pilot
departments. Learning by doing over several budget cycles will further strengthen MTBF
capacity. The Project to Improve Financial Reporting and Auditing (PIFRA) provided
connectivity to all major line departments by the end of Subprogram 2.15 The government is
keen to expand the MTBF to cover the remaining (non-pilot) departments at its own cost in
order to bring them all under the same format. However, future rollouts of the MTBF will be
partly contingent on how far line departments have assimilated PIFRA and TA support, and
readiness of the Finance Department and P&DD. Some actions have been undertaken, but
reforms are still needed in revenue generation and administration.
2.

Output 2: Civil Service Pension System made Financially Sustainable

17.
The Punjab Pension System (PPS) and the General Provident Fund (GPF) were the two
main pillars of the pension system of the provincial government. The PPS is a noncontributory,
unfunded defined benefit system that is financed from the annual budget of the provincial
government. The GPF is an unfunded, defined contribution scheme. Prior to the cluster program,
liabilities arising from PPS and GPF obligations were becoming a growing burden on the
finances of the provincial government, and the existing pension system was not financially
sustainable. Pension outlays increased from PRs1.7 billion in FY1991 to PRs425 billion in
FY2007. With the current expenditure budget for FY2007 at PRs191 billion, the pension liability
was 2.2 times the expenditure budget. The provincial government recognized that its pension
obligations have serious budget implications and, if not managed prudently, could crowd out
other development priorities of the government in the future. The absence of a robust recordkeeping and information management system, combined with weak analysis and accounting
capacity, resulted in inaccuracies in calculating pension entitlements and making payments. The
benefit structure of the pension system was also weak. For example, pensions were calculated
on the basis of last salary drawn rather than the international best practice of basing it on
average earnings over several years. The output objective was the development of a financially
sustainable pension system to provide retirement income security to civil servants.
18.
Under Subprogram 1, the legal framework for pension reform was established by the
Pension Fund Act, 2007. The Punjab Pension Fund (PPF) was created in March 2007 and the
General Provident Investment Fund (GPIF) law was submitted to the provincial assembly. An
initial PPF funding strategy, with a time-bound funding plan, was adopted in July 2007. The aim
14

Under the World Banks new program, as a result area, all government organizations are required to put their
budget in user-friendly format on their institutional websites. November 2013. World Bank. Punjab Public
Management Reform Program. Washington, DC.
15
World Bank. Project to Improve Financial Reporting and Auditing. Project I (1997) and Project II (2011).
Washington, DC.

6
was to accumulate PRs100 billion by FY2016 and to meet 30% of the annual expenditures from
investment income. PPF management rules and clear fiduciary norms for fund management
were adopted, and the management committee of the PPF was established. Civil service
pension liabilities were estimated and annual cash flow needs were determined. A policy note
on key priorities for pension administration was prepared. The Pension Administration Task
Force was appointed to establish sound record-keeping and administration, with a clear timebound plan to ensure the integrity and accuracy of the PPF and GPF record of employees.
19.
Under Subprogram 2, the GPIF was created under the GPIF Act of September 2009.
The PPF was operationalized with the appointment of the general manager, chief investment
officer, risk management officer, trustee, and internal auditor. The Pension Administration Task
Force launched the testing of alternative methods to populate the GPF database to (i) introduce
a baseline, (ii) facilitate the efficiency and accuracy of data gathering, and (iii) improve the
validation and entry of historic GPF records. By August 2009, the Office of the Accountant
General completed data entry for 988,338 employees, 165,899 pensioners, and 782,443 GPF
records using the PIFRA SAP/R3 enterprise resource planning software. The provincial
government, for the first time, assessed the solvency and sustainability of the pension scheme.
Contingent liabilities of the PPF and GPF as of June 2008 were estimated and included in the
white paper for the FY2010 budget, and this reporting is now done regularly.
20.
As required under Subprogram 3, a pension and GPF expense report in line with
International Public Sector Accounting Standard (IPSAS) 25 was prepared and integrated in the
FY2011 budget. The SAP/R3 database for most civil servants on payroll, pension, and GPF
records was completed. A single investment unit, with a sound governance structure and
practices, was created to manage the PPF and GPIF, although management capacity needs
strengthening. Allocation of an additional PRs9 billion for the PPF, envisaged in FY2011, was
not made.
21.
Output 2 was partially achieved. While the legal framework for the PPF and GPIF were
established and a professional investment unit was created, the capitalization target was partly
met. Administration improved with the automation of the pension and GPF records.
Improvement of the pension system, was not completed as originally planned. Time and
resources were expended in setting up the pension fund and making it operational, but it was
not adequately capitalized.16 The government transferred PRs12 billion to the PPF in FY2009
2010 but withdrew PRs1.8 billion during FY20092010. About 95% of the payroll, 92% of the
pension, and 75% of the historic GPF records were automated in the SAP/R3 system by the
end of 2011. Under the Pension Administration Taskforce, a detailed exercise to verify HR
Payroll data was conducted across the province in coordination with the office of the Accountant
General Punjab and 90% of the anomalies were removed. The pension fund capitalization
target had to be revised downward because of (i) budget shortfalls arising from worsening
economic conditions and reduced development partner support; (ii) changes in the provincial
governments priorities, leading to increased expenditures to counter poverty and security risks;
and (iii) few investment opportunities generating positive returns in a weak economy with high
inflation.
22.
The funding level currently is too low to meet the accrued pension and GPF liabilities.17
As of June 2013, 54% of the PPF portfolio was invested in Pakistan infrastructure bonds, 33%
16

PRs100 billion was to be accumulated by FY20152016, and 30% of the annual expenditures were to be met from
investment income.
17
While the fund had only 2% of fund requirements, in FY 2014 Rs 4.8 billion was transferred to the PPAF and Rs
3.34 billion to the GPIF, and for FY 2014 Rs 10.0 billion is projected for the PPAF and Rs 4.8 billion for the GPIF,

7
in short-term bank deposits, and 10.7% in national savings schemes. In addition to increased
funding for the PPF, parametric and systemic reforms are needed to enhance pension benefits
and coverage while making the pension system affordable and financially sustainable.18
3.

Output 3: Civil Service Motivation and Efficiency Enhanced

23.
The civil service was a drain on the provincial government budget, with its wage bill and
pensions accounting for nearly 59% of the consolidated recurrent budget in 2007. The system of
recruitment, performance evaluation and promotion, and compensation and benefits was weak.
The contractual employment system introduced in 2004 was becoming unsustainable.19 Policies
and mechanisms for placements and transfers were not properly structured. The technical and
managerial skills of civil servants deteriorated over the past two decades. Local governments
lacked sufficient capacity for planning, budgeting, and human resource management, given the
relatively short time since the launch of the devolution process under the Punjab Local
Government Ordinance of 2001.
24.
Under Subprogram 1, the Civil Service Modernization and Reform Task Force was
established to lead, guide, and oversee the required reforms. A vision for civil service reforms
was circulated to government agencies. The resources and capacity of the Civil Service Change
Management Unit were enhanced, and it was upgraded to the Public Policy and Change
Management Wing (PPCMW) of the Service and General Administration Department
(S&GAD). 20 A change management process was initiated and change management agents
were designated in all 40 provincial departments and 35 districts. A human resources working
group, chaired by the additional chief secretary, was set up to review human resources policies.
The Management and Professional Development Department (MPDD) was upgraded to the
principal training and capacity building arm of the Punjab civil service, and added as an
implementing agency for the program. Under the new provincial government, the number of
pilot departments to undergo functional review and business process reengineering was
reduced from six (P&DD, Finance Department, Local Government and Community
Development Department, S&GAD, E&TD, and L&DD) to two (E&TD and L&DD) to (i) make
reforms more manageable,21 and (ii) create model departments to encourage buy-in from other
departments and pave the way for fundamental civil service reform.22
25.
Under Subprogram 2, the provincial government approved a civil service reform policy
that laid out the provincial governments intention and commitment to modernize the civil
service, and articulated key parameters for reform.23 The Punjab Contract Appointment Policy
(2004) was reviewed and a draft human resources management manual and toolkit based on
demonstrating renewed commitment to addressing the shortfall and enabling the funds to be independently
financed.
18
Parametric reforms involve modifications to various parameters within the existing system such as retirement age
and contribution rate, whereas systemic reforms involve more fundamental reforms in the overall pension design.
In FY 2013-14, Rs 4.8 billion have been transferred to PPF and Rs 3.347 billion to GPIF. In FY 2014-15, Rs 10
billion has been allocated for PPF and Rs 4.8 billion for GPIF.
19
The pressure to regularize contractual civil service employees was increasing as their numbers expanded. The
difference in compensation between regular and contract employees was not large enough to prevent contractual
employees from seeking regularization.
20
The PPCMW is the second tier of the institutional foundation for civil service reform.
21
E&TD and L&DD were moderate-sized departments.
22
E&TD is the provincial revenue department and L&DD supports a sector that generates 40% of farmer income.
Functional review was especially important for L&DD because in addition to providing extensive services, the
department provides animal nutrition and vaccines and owns farms.
23
These included open and merit-based posting and recruitment, modern compensation packages, stable tenure,
skills development, simplified business processes, and rewards linked with service delivery indicators.

8
international good practice was prepared. The focus was shifted from an overall review of the
Civil Service Act, 1974 to developing a step-by-step road map for reforms, with pilot tests in a
few departments. The Punjab Public Service Commission (PPSC) showed strong ownership of
the recruitment process reforms. It adopted a new procedure for evaluating applications that
significantly reduced recruitment time.24 A training strategy was also approved in 2009, but was
not implemented effectively.
26.
As per Subprogram 3 indicative action requirements, the PPSC completed a functional
review of civil service recruitment, prepared an action plan for business process reengineering,
and undertook human resources reviews. 25 However, the PPSCs new management did not
agree with the results of the reviews and no recommendations could be implemented. E&TD
and L&DD completed benchmarking to identify and measure key performance indicators,
focusing on strategy, function, performance, and process. Pilot surveys to gauge public opinion
on service delivery were conducted by E&TD and L&DD and included in a report in 2010.
Training and staff development in L&DD had a positive effect on the outlook of departmental
officials, who took ownership of the reform process and carried it forward. The provincial
government collaborated with the Singapore Civil Service College to modernize the MPDD and
improve its in-house training capacity. PRs100 million was allocated for training in FY2011, and
gender was included in all training modules. The review and revision of overall provincial civil
service human resources management policies and regulations, based on the E&TD and L&DD
pilots, was not undertaken. The Pay and Pension Commission reviewed policies on tenure,
monetization of benefits, and other compensation issues, but the recommendations made to the
federal government were not accepted.
27.
Output 3 was not achieved, and did not contribute to the program outcome. There was
insufficient political will and public pressure to effect long-term, sustained change. The civil
service reform vision and change management units needed a well-thought-out strategy and a
strong agency, and the process was started but did not proceed over time. The foundations of a
professional management cadre were not made, as no civil servants were recruited under the
Provincial Management System. The proposed competitive and incentive-based recruitment
system for managing development programs was initiated but has not been sustained. Change
management agents were appointed, but the anticipated reform strategy and direction from the
PPCMW, along with a detailed change management process, did not materialize. TA resources
were utilized for functional review, human resources management review, and business process
reengineering in the two pilot departments. Some resources might have been used for broad
consultation with the education, health, and police departments, which comprise the majority of
civil servants, to solicit ideas and support for needed reforms, but the government did not
choose to proceed in this direction. The MPDD conducted training and capacity building
activities and this helped create a positive impact on the outlook of the departmental officials at
various tiers, but the impact remains limited in the absence of a robust human resources policy
that includes continuous career development.
4.

Output 4: Greater Private Sector Participation in Economic Activity, and a


Redefined Role for the Punjab Public Sector

28.
Private-sector led growth, including through private sector participation in infrastructure
and social services, can contribute to the program outcome of an efficient, accountable, and
enabling government. Some initiatives were taken under the PRMP, but there was no coherent
24
25

The recruitment time was reduced because only shortlisted candidates were interviewed under the new procedure.
The PPSC, which recruits public servants for basic pay scales 17 and above, has structural, capacity, and
procedural constraints.

9
strategy for private sector development prior to the cluster program. The policy and regulatory
framework for PPPs was weak. Output 4 was set up to address this gap.
29.
For output 4 under Subprogram 1, a private sector development committee was created.
Led by the chair of the P&DD board, the committee was responsible for overseeing the
development of a PSD strategy, developing an action plan for implementation of the strategy,
and providing guidance to the PPP cell. A PPP cell was set up in PD&D in 2008 to draft the PPP
policy and regulatory framework and support the development of PPP in a systematic manner.
A communication strategy for core labor, environment, and quality standards was prepared to
improve the competitiveness of the industrial, commercial, and agricultural sectors.
30.
Under Subprogram 2 a private sector development strategy was developed, covering
key government interventions to address (i) the business and investment environment links in
the legal and judicial system, infrastructure, economic management, and value chains;
(ii) agriculture; (iii) industrial policy; (iv) small and medium-sized enterprises; (v) construction;
(vi) private sector participation in infrastructure, particularly power and special economic zones;
and (vii) human resource development. A committee was established to develop single-window
facilitation for foreign direct investors. A framework outlining the road map for PPPs was
developed in 2009, and a PPP policy was approved in 2009. The Punjab Assembly passed the
PPP for Infrastructure Act on 12 July 2010 (replaced by the revised Infrastructure Act 2014).
The P&DD hired a manager and two professional staff for the PPP cell. Project development
facility guidelines were approved by the provincial cabinet in 2009 and $1 million was allocated
to the facility in the FY2010 budget. A preliminary list of potential PPP projects was identified by
the P&DD.
31.
In accordance with Subprogram 3 indicative actions, a PPP steering committee was
established in 2010, chaired by the minister of the P&DD and with representation from the local
business chambers, the provincial government, and the private sector. The PPP Cell, with nine
technical staff, acts as the secretariat to the PPP steering committee. A PPP risk management
unit was set up in the Finance Department but remains under-resourced. A risk management
policy was developed, which specified criteria for risk management and defining principles such
as project quality, legality, fiscal prudence, and obligations. Guidelines on PPP project inception,
preparation, and transaction execution were created. Guidelines and regulations on land
acquisition, environmental, and social safeguards pertaining to PPPs, were also defined. Four
projects were identified for transaction support. Significant additional work has been done since
early 2014, with a new Act, a PPP unit staffed with nine professionals, and feasibility studies
being conducted for projects worth around Rs 63 billion, with twelve projects supported by the
Project Development Facility.
32.
Output 4 was partially achieved, with the policy and regulatory framework for PPP set
up, but other aspects of private sector development were not completed. The private sector
development strategy was developed, but not implemented. The private sector development
committee did not operate on a regular basis, had no permanent secretariat, and the large
committee membership made decisions difficult. Subprogram 2 shifted focus to PPPs to align
with the governments growing interest in this area. As with pension reform, the government
started establishing the necessary government offices based on the PPP law at the time of the
cluster programs inception. The PPP momentum was not carried forward and private sector
participation did not materialize in the education, health, and infrastructure sectors as envisaged
in the output. To facilitate learning by doing, simple PPP (service and management contracts)
demonstration projects could have been prepared. However, the PPP cell in the P&DD lacks the
necessary technical capacity to drive further PPP reforms and to identify, develop, and promote

10
PPP projects. There have been frequent changes of PPP cell management, no training, and no
requirement that all proposed PPP projects are processed through the PPP cell and risk
management unit. Every PPP project carries an element of risk that needs to be cleared by the
Finance Department, but the department lacks the expertise to evaluate PPP project risks.
5.

Output 5: Results-Based Management Adopted

33.
This output was introduced during Subprogram 2 to help the provincial government
adopt a results focus for its development agenda, moving from inputs and activities to greater
accountability for results. The provincial government strategy for economic growth and service
delivery was approved by the provincial cabinet. A results-based management (RBM) unit was
established in the P&DD, and a working group chaired by the P&DD chairperson was
established for the introduction of a results framework for service delivery. The RBM policy was
approved by the Chief Minister. A draft results framework for the province and key sectors
linking development impact, outcomes, and outputs with resources and enabling systemswas
developed as a working document by the working group. The L&DD, D&IP, and HED were
selected as pilots for RBM implementation. An RBM unite was established in the PMU. RBM
training for officials was conducted at the MPDD. In accordance with Subprogram 3
requirements, gender-sensitive indicators for RBM were developed in the L&DD, DI&P, and
HED. The RBM framework was developed but not approved, and results framework documents
were formulated but not implemented.26
34.
Output 5 was not achieved and did not contribute to the program outcome. The draft
results framework was not operationalized in the pilot L&DD, DI&P, and HED. Targeted TA
support was not available, and the cancellation of Subprogram 3 resulted in lower government
interest in rapidly undertaking the required reforms.
C.

Program Costs

35.
At the design stage, the cluster program comprised three subprograms of $250 million
each. The tranche for Subprogram 1 was released in full on 8 January 2008 from ADBs
ordinary capital resources. The tranche for Subprogram 2 was reduced to $150 million because
of debt ceiling limits for Pakistan, in accordance with the IMF standby agreement, and was
released on 30 September 2009. Subprogram 2 comprised a loan of $75 million from ADBs
ordinary capital resources and a loan of SDR48.3 million or $75 million equivalent from ADBs
Special Funds resources. Subprogram 3 was not processed. The reduction in the tranche for
Subprogram 2 and cancellation of Subprogram 3 lowered the governments level of interest in
pursuing the cluster program reforms, and resulted in the funding level being too low to meet the
accrued pension and GPF liabilities. A TA loan of $8.8 million was also provided from ADBs
Special Funds resources. The TA loan disbursement began on 18 December 2008, 1 year after
its effectiveness, because security concerns delayed the fielding of consultants.
D.

Disbursements

36.
The TA loan funds were used to provide TA to implement the cluster program reforms.
The consulting services allocation was increased by 24% from $4.10 million to $5.10 million.
This was done because the capacity of the implementing agencies was weaker than originally
estimated and more consulting services were needed to ensure effective delivery of the
program outputs. Of the $5.10 million, $4.31 million was utilized. The original allocation for
26

The agenda item could not be discussed because of shortage of time in the former governments last cabinet
meeting.

11
workshops, training, seminars, and conferences was reduced from $503,249 to $165,049; of
this, only 39% was utilized. The allocation for equipment ($644,525) was not utilized. TA loan
resources were also underutilized as grant funds were available from the TA on support to
governance reforms. 27 Unutilized TA loan resources could have been used to support
Subprogram 3 if it had been processed.
E.

Program Schedule

37.
Subprogram 1 was implemented from June 2006 to October 2007 and Subprogram 2
from January 2008 to September 2009. Though a proposal for Subprogram 3 was to be
considered by ADBs Board of Directors about 1820 months after loan effectiveness for
Subprogram 2, subject to the governments readiness to continue its reforms, ADB did not
proceed with Subprogram 3. The TA loan was implemented from December 2007 to June 2012.
F.

Implementation Arrangements

38.
The P&DD was the executing agency. The main implementing agencies were the
Finance Department and P&DD for output 1; Finance Department for output 2; PPCMW of the
Services and General Administration Department and the MPDD for output 3; the departments
of commerce and investment, industries, and labor and human resource for output 4; and L&DD,
HED, and DI&P for output 5. The executing and implementing agencies for the TA loan were the
same except for output 1 (Finance Department, P&DD, DOH, DI&P) and output 5 (P&DD). A
high level steering committee to guide the cluster program implementation and an executive
committee to ensure efficient implementation of the cluster program were set up.28 The program
management unit (PMU), established under the PRMP and in place since 2003, was tasked to
be the secretariat for these two committees. To monitor and evaluate the program cluster, a
detailed plan was developed through a consultative process between the executing agency,
implementing agencies, and ADB. The implementation arrangements were partially satisfactory.
Proper mechanisms for interagency coordination, required particularly for output 3, were not set
up. While the government that was reinstated in 2009 continued with the cluster program
reforms, commitment to change was markedly lower.29 As a result, the involvement of the high
level steering committee in providing guidance, coordination, implementation, and monitoring
support was also reduced. The PMU provided coordination support but, given its institutional
memory (having been the PMU for the PRMP as well), it could have been more actively
involved in assisting implementing agencies in addition to coordination.
G.

Conditions and Covenants

39.
Program effectiveness and subprogram tranche releases were conditional on
compliance with policy conditions. There were no delays in meeting the conditions of
effectiveness for Subprograms 1 and 2. One hundred and thirty four of the 149 covenants
(Appendix 4) were fully complied with. Five covenants that were not met involved systematic
reporting by the borrower and were not disbursement conditions. The covenants that were partly
met related to the capitalizing of the PPF and GPIF and security issues. The executing agency
27

ADB. 2007. Technical Assistance to Pakistan for Support to Governance Reforms in Pakistan. Manila (TA 4922PAK, financed by the Government of the United Kingdom).
28
The steering committee was chaired by the chief secretary of Punjab. Members comprised the P&D chairperson,
the additional chief secretary of S&GAD, the finance secretary, secretaries of implementing agencies, and at least
three representatives of civil society and the private sector. The executive committee was chaired by the P&D
chairperson and comprised members from the Finance Department and S&GAD.
29
Political tension resulted in the dismissal of an elected government in Punjab in March 2009. The government was
subsequently reinstated.

12
did not set up a project performance management system to undertake periodic review, but a
detailed action plan was developed through a consultative process between the implementing
agencies, ADB, and the executing agency for the program. One covenant was partially complied
with, as the focus of output 4 shifted primarily to PPPs under Subprogram 2. As a result, the
P&DD became the principal implementing agency for this output instead of the P&D, commerce
and investment, industries and labor departments, as originally agreed.
H.

Related Technical Assistance

40.
The TA is rated partly successful. The TA ($950,000) covered policy advisory, diagnostic
studies, stakeholder consultations, and capacity building. Outputs were delivered effectively
during the first and second subprograms of the cluster. However, there was a 50%
implementation time overrun and 50% underutilization of TA funds.30
I.

Consultant Recruitment and Procurement

41.
Implementation of the TA loan was from December 2007 to June 2012. A total of
140 person-months of international and 156 person-months of national consulting services were
budgeted. During implementation, ADB and the provincial government experienced difficulties in
hiring quality international consultants, mainly because of security concerns. This resulted in the
reallocation of consulting services between international and national consultants. International
consulting services of 72 person-months and national consulting services of 452 person-months
were utilized. ADB was able to engage only the third-ranked firm. No goods were procured.
J.

Performance of Consultants, Contractors, and Suppliers

42.
The performance of TA loan consultants was satisfactory considering the often difficult
circumstances associated with the cluster program. Overall, consultants provided good
technical advice to meet client needs. The firm hired to implement the civil service reforms and
public finance management reforms worked with the executing agency effectively in both areas.
In particular, consultants were helpful in rolling out the MTBF in the pilot departments and
developing the electronic database for the civil service payroll, pension, and GPF records.
K.

Performance of the Borrower and the Executing Agency

43.
The performance of the provincial government is rated partly satisfactory. The executing
agency (P&DD), along with the Finance Department, was fully committed to the intended
reforms. The reform process was driven through the PMU, a de facto extension of the executing
agency. The PMU was composed of government officials and contractual staff, selected based
on merit, and was established to coordinate externally financed projects. Despite the efforts of
the PMU, some implementing agencies lacked commitment to reforms and, coupled with the
reform complexity, those agencies were not able to implement the changes. In early 2008, the
new government continued supporting the cluster program but with far less commitmentpartly
because of the reduced Subprogram 2 tranche size and cancellation of Subprogram 3. The
provincial government would have benefitted from a critical assessment of the likelihood of
success under the various outputs, particularly output 3, and more frequent discussions with
ADB about the possibility of refocusing the outputs as needed during the implementation period.

30

ADB. 2009. Technical Assistance Completion Report: Effective Implementation of Punjab Government Efficiency
Improvement Program in Pakistan. Manila (TA 7003-PAK).

13
L.

Performance of the Asian Development Bank

44.
ADBs performance is rated partly satisfactory. ADB conducted seven review missions
for Subprograms 1 and 2. No review missions were fielded from August 2011 to March 2012
because of security issues and the program lending freeze. Changes in the ADB sector division
and turnover of project officers administering the program also caused gaps in oversight during
this period. ADB maintained dialogue with the executing and implementing agencies via email
and telephone, and provided support and guidance to the PMU remotely on procurement and
accounts issues. Taking into account the provincial governments interest in PPPs during
program implementation, ADB refocused output 4 to PPPs under Subprogram 2 to good effect.
ADB should have taken stock of outputs 3 and 5, and narrowed the focus or dropped them
completely. For better TA resource use and results, ADB could have detected the reasons that
were causing underutilization of TA resources. Once determined, both ADB and the government
could have redirected funds to strengthen implementing agency capacity to achieve
Subprogram 1 and 2 outputs, as well as indicative reforms under Subprogram 3.
III.
A.

EVALUATION OF PERFORMANCE

Relevance

45.
At the time of formulation, the cluster program design was relevant. Over time, as a
result of change in circumstances, the program is rated less than relevant. The program built on
ADBs past interventions, which laid the broad foundation for reforms in public resource
management, governance, infrastructure, and social sectors. It was consistent with the
provincial governments long-term development strategy as articulated in Vision 2020, to
improve public sector efficiency and create an enabling environment for the private sector. By
2008, Punjab had a new government and faced food, fuel, and financial crises, combined with
natural calamities and worsening security. The new government reviewed the situation and set
very different priorities, with increased expenditure to counter increased poverty and security
risk, and less focus on the high-impact, intensive reforms targeted under the cluster program.
B.

Effectiveness in Achieving Outcome

46.
The program was less than effective in achieving its outcome. There were substantial
achievements at the output levelincluding introduction of the MTBF in seven departments, the
establishment of the PPF and automation of recordkeeping for pensions, and the development
of the enabling institutional and financial framework for PPPs. However, these accomplishments
only resulted in partial achievement of the outcome. The reforms were not completed as
envisaged in the cluster design because of a combination of reform complexity and the need for
broad-based support, lower funding availability from ADB, and change of government priorities.
The budget process is not fully performance-based, even in the social sectors. Returns on PPF
and GPIF investments have been able to meet only 2% of the annual pension liability. The
performance-based human resources management system has not been fully implemented.
Benchmarking surveysincluding indicators to measure strategic, functional, performance, and
process performancehave been undertaken in two pilot departments, but no data have been
collected since the benchmarking. The draft RBM framework was developed but not
operationalized, so improvements in development outcomes cannot be attributed to RBM. The
outputs did not contribute effectively to the outcomes: three outputs were partially achieved
(outputs 1, 2, and 4) and two were not achieved (outputs 3 and 5).

14
C.

Efficiency in Achieving Outcome and Outputs

47.
The program is rated less than efficient in achieving its outcome and outputs. The MTBF
reform assisted the government to realize that budget reform could be initiated in sector
departments, without being engineered by the Finance Department. The institutional framework
for partial funding of pensions and for PPPs was established during the program period,
allowing for more efficient allocation of government resources over time. ADB and the
government could have supported more efficient utilization of TA resources and better program
output results by adjusting them more proactively and strategically during the program period.
Efficiency was adversely affected by the downturn in economic growth after 2007, with a new
government prioritizing expenditures for direct poverty reduction and security interventions.
D.

Preliminary Assessment of Sustainability

48.
The program outcome is unlikely to be sustainable. The provincial government has
pursued reforms, but government priorities have shifted toward increased expenditure to
counter increased poverty and security risks. Despite political will to roll out the MTBF in all 34
departments, this requires substantial additional expertise. A framework for pension system
reform has been developed, but the provincial government has not (i) transferred resources to
the PPF and GPIF in line with the funding strategy; or (ii) introduced sufficient reforms to
improve management of accrued liabilities. The policy and legal framework for PPPs has been
developed, but institutional arrangements are inadequate to develop a pipeline of viable projects.
E.

Impact

49.
The program helped establish some elements of the institutional frameworks for
planning and budgeting, pension reform, and PPPs. However, to deliver and sustain program
impact, the institutional framework for each output needed to be strengthened through staffing
and capacity building. The program impact of high, sustained, and private sector driven growth
and improved service delivery was not achieved.
50.
Effective gender mainstreaming. Subprogram 2 of the cluster program attempted to
mainstream gender reforms and support gender equity in Punjab. Allocations for the gender
reform action plan were doubled, and gender-focused capacity building and sensitization
workshops were held (Appendix 3). RBM could have helped mainstream gender equity through
increased fiscal discipline. However, Punjabs RBM was developed but not approved.
IV.
A.

OVERALL ASSESSMENT AND RECOMMENDATIONS

Overall Assessment

51.
The program is rated unsuccessful based on assessments of overall relevance,
effectiveness, efficiency, and sustainability. The program design and formulation was relevant
but became less than relevant as Subprogram 3 was not processed. Termination of ADBs
programmatic support following IMFs halt of its program thus also led to the programs overall
rating of unsuccessful rather than partly successful. The outcome was not achieved. Of the five
outputs, three were partially achieved and two were not achieved. The program was less than
effective and implementation was less than efficient, partly because of deterioration in economic
conditions, reduced development partner support, and changes in the governments priorities.
The program is unlikely to be sustainable. Sustainability will depend on the ability of the
provincial government to commit to and undertake the further steps needed to complete the
reforms started under the cluster program.

15
B.

Lessons

52.
The design and implementation of the cluster program shows that it was too ambitious in
its scope, and that depth of program engagement is more important than breadth of reforms.
Improving the overall efficiency of the government is a complex undertaking. It requires major
changes in existing institutional arrangements, human resource capacity, and legal and
regulatory frameworks. Key lessons are that (i) design should be based on thorough analysis of
underlying issues to develop a realistic and properly sequenced set of reforms; (ii) proactive,
frequent, and sustained dialogue with the political leadership as well as high- and mid-level
officials is critical to create government ownership and buy-in for reforms; (iii) cluster programtype programs require a medium- to long-term implementation time frame, with very regular
reporting and progress discussions, flexible implementation arrangements, frequent
consideration of the need for any course corrections or changes, and a strategically planned,
carefully managed, and integral role for TA; and (iv) given security concerns, TA design should
allow sufficient time for recruitment of consultants.
C.

Recommendations
1.

Program Related

53.
Further action and follow-up. ADB should continue engaging with the provincial
government on the benefits of continuing reforms started under the cluster program. It should
support reforms in sectors where regular intensive consultations assure sustained political and
bureaucratic support and where the provincial government is requesting financial assistance,
including for (i) MTBF reforms in the remaining departments, (ii) actuarial assessments and
substantive pension restructuring to ensure affordability, and (iii) PPPs.
54.
The provincial government has requested continued PPP support. Work during 2014 on
PPP legislation suggests stronger political will to move this agenda forward. The technical
capacity of the PPP cell in the P&DD to drive PPP reforms and to identify, develop, and promote
PPP projects and the Finance Department to clear PPP fiscal risks, need to be strengthened.
55.
Additional assistance. The following are recommended: (i) rollout of the MTBF; (ii)
capitalization of the PPF; (iii) capacity building of relevant government agencies to formulate,
appraise, and approve quality PPP projects; and (iv) support for RBM.
56.
Timing of the program performance evaluation report. The program performance
evaluation report can be prepared at any time, as the cluster program has been completed.
2.

General

57.
ADB should engage proactively with the political leadership and the affected civil
servants to ensure ownership, reach consensus on the scope of reforms along with an action
plan, and properly assess government capacity to implement that program effectively. During
implementation, ADB should undertake (i) regular communications with implementing agencies,
the executing agency, and PMU including progress report discussions and identification of
problems faced and solutions provided; (ii) reinforcement of regular meetings and reporting from
the steering committees; (iii) immediate action to confirm approach and activities when
governments change; and (iv) frequent public communications on the targeted activities and
results, and steps taken. This will help keep the program on track. It will also allow for necessary
adjustments, especially when assumptions made during the design stage do not hold true and
risks materialize. In unforeseen circumstancessuch as political change, security deterioration,
and macroeconomic crisismore frequent program reviews should be undertaken.

16

Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary
Impact
Sustained high
economic growth in the
Punjab, with lower
poverty incidence and
improved delivery of
public services

Outcome
Greater efficiency in the
allocation of scarce
resources and greater
responsiveness to
citizens needs

Performance Indicators/Targets

Implementation Status as of
March 2013

Average growth rate of around 7% in


provincial GDP over the July 2007
June 2014 period

Unlikely to be achieved. Annual


average real GDP growth was 2.5% over
20072011.

By 2014, poverty incidence in the


Punjab will have been reduced to
10%, from 17% in 2006

Unlikely to be achieved. Poverty rate


declined from over 20% in 2007 to 19%
in 2012.

By 2014, sustained progress in


achieving the MDGs

Unlikely to be achieved.

By 2014, budget process fully


performance-based, particularly in the
social sectors

Partly achieved. MTBF was developed


in seven pilot departments, including
DOH and HED, and government is keen
to expand MTBF further.

By 2014, at least 30% of annual


pension liability can be met from
returns to PPF and GPIF

Not achieved. While considerable


progress has been made on the
institutional side (creation of PPF,
automation of the record-keeping), this
did not contribute to the sustainability of
the pension financing. The funding level
covers only 2% of annual pension
liability. No pension reforms were
introduced.

By 2014, all officer cadre positions


(i.e., grade 17 and above) will have
come under the new performancebased HRM system

Not achieved. The focus shifted from an


overall review of the Civil Servants Act,
1974 to pilot tests in a few departments.

By 2014, the private sector


contribution to provincial GDP will
have risen to about 40% from the
current 30% level

Not achieved.

An MTEF fully operational, integrating


planning and fiscal dimensions, to
increase transparency and
predictability of the budget process

Partly achieved. MTBF was developed


in seven pilot departments, including
DOH and HED.

Minimum service delivery standards


adopted, and adhered to, in social

Partly achieved. Minimum delivery


standards were adopted but not adhered

Outputs

Public resource
management
modernized and made
more efficient

Appendix 1

Design Summary

Civil service pension


system made financially
sustainable

Civil service efficiency


and motivation
enhanced

Greater private sector


participation in economic
activity, and a redefined
role for the Punjab public
sector

Performance Indicators/Targets
sectors with clear performance
targets and financing plans

17

Implementation Status as of
March 2013
to under Punjab Millennium
Development Goals Program.

Citizen satisfaction surveys to show


clear improvements in public
perception (in relation to the first
benchmark survey to be undertaken
in 2008)

Not achieved.

Funded civil service pension


accumulations will have increased
from PRs12 billion in 2007 to at least
PRs57 billion in 2011

Not achieved. The government


transferred PRs12 billion to the PPF in
FY2009 and FY2010.

Pension and GPF system automated


and made transparent, with the
incidence of errors and fraud
significantly reduced
At least eight key departments
accounting for about 75% of the
Punjab civil service will have
embraced performance-based
recruitment and career progression

Achieved95% of payroll, 92% of


pensions, and 75% of historic GPF
records were automated by the end of
2011.
Not achieved.

At least four large departments


restructured to increase efficiency
following functional review and
business process reengineering

Partly achieved. Functional review and


business process reengineering were
prepared for two departments, resulting
in some reform in one of the two
departments.

Management and Professional


Development Department upgraded
to a regionally recognized civil service
training institution, from its nascent
status in 2007
Cost of doing business benchmarked
through regular surveys

Not achieved. While the MPDD was


upgraded to the principal training and
capacity building arm of the Punjab civil
service, its capacity as a training institute
remained limited.
Not achieved.

Regulatory impact assessments


institutionalized

Not achieved.

PPP cell fully operational and PPP


implementation standardized across
all sectors. At least six to seven PPP
initiatives contracted out in the
infrastructure and social sectors.

Partly achieved. Key elements of


enabling institutional and financial
framework for PPPs have been put in
place, but technical expertise in both the
PPP cell and the Finance Department is
missing.

18

Appendix 1

Design Summary
Performance Indicators/Targets
Subprogram 1 Activities
1. Supporting capacity building of the MTBF cell at the Finance
Department and the MTDF cell at the P&DD
2. Introducing performance orientation in the annual budget
process at the Department of Irrigation and Power
3. Establishing the Punjab Pension Fund and General Provident
Fund
4. Strengthening pension administration and payment system
5. Improving the pension system
6. Reviewing human resource managementrelated policies
and institutions in Punjab
7. Developing a civil service HRM manual for Punjab and
piloting the HRM scheme
8. Reviewing the rules of business in the Punjab
9. Undertaking a functional review of selected government
departments
10. Undertaking capacity building for key government
departments
11. Supporting the institutionalization of regulatory impact
assessment
12. Building capacity and supporting the PPP cell in P&DD,
including establishing a risk management framework and
viability gap funding mechanism
13. Supporting the establishment of a Monitoring and Evaluation
Unit in P&DD

Implementation Status as of
March 2013
Not achieved.
Achieved.
Achieved.
Achieved.
Not achieved.
Achieved.
Partly achieved. Pilot testing of HRM
manual did not take place.
Not achieved.
Achieved.
Achieved in seven departments for
MTBF and in one department for civil
service reform.
Not achieved.
Partly achieved. PPP cell has been
established, but has limited capacity.
Achieved.

DOH = Department of Health, GDP = gross domestic product, GPF = General Provident Fund, GPIF = General Provident
Investment Fund, HED = Higher Education Department, HRM = Human Resources Department, L&DD = Livestock and
Dairy Department, MDG = Millennium Development Goal, MPDD = Management and Professional Development
Department, MTBF = medium-term budget framework, MTDF medium-term development framework, MTEF = mediumterm expenditure framework, P&DD = Planning and Development Department, PPF = Punjab Pension Fund, PPP =
publicprivate partnership.
Note: The design and monitoring framework of Subprogram 1 has been used.
Source: Asian Development Bank.

POLICY MATRIX FOR THE PUNJAB GOVERNMENT EFFICIENCY IMPROVEMENT PROGRAM


Policy Objective

Subprogram 1 Actions

Subprogram 2 Actions

Subprogram 3 Indicative
Actions
(October 2009March 2011)

(July 2006October
(January 2008September 2009)
2007)
CPA 1: Subprogram 1 Fiscal and Financial Management; Subprogram 2 Improve Public Financial Management
Subprogram 1: Improve
Greater predictability,
public resource management transparency in budget
with the aim of
allocation through
(i) improving coordination
adoption of a rolling
between medium-term
MTBF for FY20082010.
planning and budgeting,
(ii) increasing transparency
and accountability of the
budget process, and
(iii) improving efficiency in
revenue collection to at least
double the own source
provincial revenues over this
period.
Subprogram 2: Improve
expenditure management to
strengthen fiscal discipline.
Pre-budget consultations with
Pre-budget consultations
provincial assembly completed
with provincial assembly
for FY2010, and proposed
held for FY2011 and FY2012
amendments to rules of
budgets.
procedure submitted to provincial
assembly.

Progress as of
December 2013

Subprogram 1 actions complied


with.
A rolling MTBF for FY2008
FY2010 with aggregate resource
envelope was adopted in June
2008.

Appendix 2

Subprogram 2 and indicative


Subprogram 3 complied with.
Standing committee approved
and institutionalized pre-budget
consultations and they have
been made part of the Provincial
Assemblys rules of procedures.
Pre-budget consultations with
the provincial assembly were
held for FY2010 for the first time
in the provinces history. Prebudget consultations were held
on 24 January 2011 for FY2011
and FY2012 budgets.

19

Subprogram 2 Actions

(July 2006October
2007)
Fiscal discipline
enhanced through
improved coordination
between planning and
budgeting functions.

(January 2008September 2009)

Transparency of the
annual budget
statements increased
through consolidation of
recurrent and
development
expenditures by sectors.

(i) Provincial revenue targets and


expenditure ceilings approved by
cabinet through MTBF for
FY2010FY2012;
(ii) Pilot bottom-up output-based
budgets prepared for DOH and
DI&P for FY2010FY2012 to link
expenditure with outputs;
(iii) Annual budget and MTBF
integrated for DOH and DI&P for
FY2010 (in the application of the
MTBF for the first year for these
two departments in FY2010
FY2012).

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Application of MTBF
extended to E&TD, L&DD,
and HED by FY2010.

MTBF extended to Housing,


Urban Development
Department, Public Health
Engineering Department,
and Communication &
Works Department and a
selected district in FY2011.

Progress as of
December 2013

Subprogram 1 action complied


with. Single units have been
created for the pilot departments
to oversee budget preparation.
Joint Finance Department and
P&DD protocols adopted to
increase coordination between
recurrent and development
expenditures.
Subprogram 1 and 2 actions
complied with.
(i) The BCC, FY20112012 and
FY20122013 delivered in
November 2010 and November
2011 for two budget cycles;
(ii) Pilot bottom-up output-based
budgets were prepared for DOH
and DI&P for FY2010FY2012;
and (iii) annual budget and MTBF
were integrated for DOH and
DI&P for FY2010FY2012.

Appendix 2

Subprogram 1 Actions

20

Policy Objective

Indicative Subprogram 3 action


complied with.
MTBF for FY20102011 and FY
2011-2012 linked the aggregate
resource envelope with strategic
allocations using output-based
budgeting for seven pilot
departments.
Subprogram 3 indicative action
partly complied with.
Provincial cabinet has approved
Medium Term Fiscal Framework
and Medium Term Budgetary
Framework budget statements
20102013 for five MTBF
departments; Budget Strategy

Policy Objective

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)

ADP for FY2011 rationalized


by (i) eliminating ongoing
schemes whose present
allocation is less than 10%
of the financing needs, and
(ii) excluding new schemes
where the allocation is less
than 15%.

paper, 20112012.
MTBF has been rolled out to the
Public Health Engineering
Department and Communication
& Works Department. It was not
rolled out in HUD in FY2011 as
decided in consultation with the
Finance Department. All seven
pilot departments have approved
MTBF budget statements, 2011
2014.
Subprogram 2 and indicative
Subprogram 3 actions complied
with.

Subprogram 2 and indicative


Subprogram 3 actions complied
with.
FY2010 ADP reduced by 25%
the number of new schemes with

21

Quality of ADP improved by


reducing unapproved
schemes by 90% by
31 December of each fiscal
year, and in practice

Progress as of
December 2013

Appendix 2

Improved process of applying for


supplementary grants
implemented by Finance
Department through pilot testing
in DOH and DI&P in FY2010: (i)
The use of a new pro forma that
requires justification for
supplementary grant requests;
(ii) For DOH through setting the
ceiling for net supplementary
grants (i.e., gross supplementary
grants less savings in the same
grant) for current expenditures at
10% of its budget estimates and
for development expenditures at
5% of its budget estimates; (iii)
For DI&P through setting the
ceiling for net supplementary
grants (i.e., gross supplementary
grants less savings in the same
grant) for current expenditures at
5% of its budget estimates and
for development expenditures at
10% of its budget estimates.
Quality of FY2010 ADP improved
by (i) reducing the number of
new schemes with less than 10%
allocation of project cost by 25%
under ADP for FY2009; and

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

(ii) reducing the number of


unapproved new schemes
(through either approvals or
cancellation) by at least 50% in
ADP for FY2010.

institutionalized in the
revised Planning Manual.

Gender Reform Action Plan


budget allocation doubled from
FY2008 to FY2010 to support
gender mainstreaming.

Gender-responsive
budgeting introduced in the
health and education
departments from FY2011.

Transparent planning
procedures, including
requirements for public
consultations, stipulated
at district and municipality
levels.

Progress as of
December 2013

less than 10% allocation of


project cost under ADP for
FY2009, and reduced by 50% the
number of unapproved new
schemes in the ADP for FY2010.
The government reduced the
number of unapproved schemes
by 90% in FY2011.
Subprogram 1 action complied
with. Rollout of MTBF in a
selected district was envisaged
under Subprogram 3. In
accordance with an agreement
between ADB and the provincial
government, it was decided to roll
out the MTBF at district level as
soon as the new local
government system (devolution
system) was in place. However,
the new system was not
established under Subprogram 3.
Local Government Planning
Manual notified by P&DD for
adherence at the district
government and Tehsil Municipal
Administration level.
Subprogram 2 and indicative
Subprogram 3 actions complied
with.
Gender-responsive components
were identified by DOH and HED
in their FY2011 budgets. Gender
element has been reflected in
current BCC. MTBF BCC, 2011
2014 includes a specific element
that encourages gender
elements in the budgeting
process. Based on BCC, para. IX
(p. 14), MTBF departments
(more specifically DOH and

Appendix 2

Subprogram 1 Actions

22

Policy Objective

Policy Objective

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

Appendix 2

23

HED) are required to provide


gender-related output indicators.
Deputy district officers would use
Form S-2 to provide this
information. Additionally,
Form S-1 (p. 33) has been
designed to provide genderspecific information relating to
inputs.
Departmental Staff Reviews
conducted for all MTBF
departments. Departmental
policies assessed from gender
perspective.
The MTBF budget statement,
20112014 reflects gender
elements, particularly for DOH
and HED.
P&DD has approved the case for
amending the PC I, II, III, IV, and
V forms with regards to gender
mainstreaming concerns.
Departments now have to
provide gender-disaggregated
data compulsorily as an
addendum to PC I. On the
directions of P&DD, PRMP and
Strengthening Poverty Reduction
Strategy Monitoring Project have
developed a draft addendum to
PC I containing gender-related
provisions, and these have been
reviewed by ADB and P&DD.
P&DD is of the view that the
addendum to PC I containing
gender-related provisions may
be limited to social sectors only.
This will be finalized in
consultation with P&DD and
Strengthening Poverty Reduction
Strategy Monitoring Project

Subprogram 2 Actions

(July 2006October
2007)
Planning and budgeting
functions improved in key
sectors through:
(i) operationalizing the
Strategic Policy Unit in
DOH to define strategic
priorities and improve
medium-term planning
and budgeting
processes; and
(ii) establishing the MTEF
committee in DI&P to
oversee medium-term
planning and budgeting.

(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

Complied with.

Property tax survey


completed and annual rental
valuation tables updated.
Urban immovable property
tax exemptions rationalized.
Online collection of motor
vehicle tax implemented.

Subprogram 3 indicative action


partly complied with. Property tax
survey was undertaken in 2013
and the annual rental value table
was updated. Summary of
taxation reforms was approved
by the Provincial Cabinet
Meeting on 6 January 2011 for
implementing revised annual
rental valuation tables and
rationalization of tax exemption
for UIPT. However, this has not
been implemented to date.
E&TD held discussions with the
National Bank of Pakistan for
online collection of motor vehicle
tax. The financial proposal
submitted by the National Bank
of Pakistan is not financially
viable for the Government of
Punjab. E&TD has again taken
up the matter with Governor
State Bank for consideration.

Appendix 2

Subprogram 1: Achieve
performance orientation in
annual budgeting process in
key sectors, with clear
targets, among others, to
increase primary school
enrollment rate from 70% in
20062007 to above 80% in
20082009 and reaching the
MDG target of 100% by
2012; and reduce infant
mortality to below 60 per
1,000 live births from 72 and
maternal mortality to below
220 per 100,000 live births
from 257 over the period
(paving way for meeting the
MDG target of 145 by 2019).
Subprogram 2: Improve tax
administration and structure.

Subprogram 1 Actions

24

Policy Objective

Policy Objective

Subprogram 1 Actions

Subprogram 2 Actions

Subprogram 3 Indicative
Actions
(October 2009March 2011)

(July 2006October
(January 2008September 2009)
2007)
CPA 2: Subprogram 1 Pension Reform; Subprogram 2 Improve Contingent Liability Management
Subprogram 1: Establish
Fiscal transparency
PPF and GPIF by
increased by estimating
(i) accelerating their
civil service pension
capitalization to achieve a
liabilities and determining
funding level of at least
annual cash-flow needs.
PRs100 billion by FY2016
and (ii) instilling sound
fiduciary discipline in the
management of PPF and
GPIF.
Fiscal space and
predictability enhanced
through the adoption of a
funding strategy to meet
pension liabilities.

Subprogram 1 action complied


with due to deletion of this loan
covenant (Schedule 5, para. 9 of
the loan agreement) and policy
condition. The initial funding
strategy was adopted in March
2007, aiming to accumulate
PRs100 billion by FY2016 with
the expectation of meeting about
30% of the annual expenditures
from investment income.
However, the government was
not on track to reach this funding
target due to (i) budget shortfalls
arising from worsening economic
conditions and reduced
development partner support; (ii)
changes in the governments
priorities, with increased
expenditures to counter
increased poverty and security
risks; and (iii) poor economic
conditions and high inflation
eroding positive investment
returns. These factors led to the
revisions in the funding strategy
adopted in September 2010.
Subprogram 2 action complied
with. Under Subprogram 2, the

25

PRs12 billion transferred to the


PPF in line with revised funding

Subprogram 1 action complied


with. Two actuarial assessments
of PPF and GPF liabilities were
undertaken in June 2009 and
2010. A third assessment is
planned in the second half of
2013.

Appendix 2

Subprogram 2: Improve
financing, investment, and

Progress as of
December 2013

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)

sustainability of pension and


GPF expenses.

Subprogram 3 Indicative
Actions
(October 2009March 2011)

strategy for the PPF, and GPIF


approved by the provincial
cabinet.

Steps for good fiduciary


governance of the
pension system put in
place through the
adoption of PPF
management and
investment rules and
establishment of a
management committee.

PPF operationalized with


(i) appointment of general
manager and at least three
professional staff, and
(ii) appointment of trustee and
external auditor.

PRs9 million for FY2011


transferred to PPF and
GPIF in line with financing
strategy.
PPF and GPIF managed by
a single investment unit, with
adequate capacity and
sound governance
structures and practices.

Progress as of
December 2013

provincial government transferred


PRs12 billion as follows: ,
PRs6 billion in FY2009, and
PRs6 billion in FY2010. However,
the provincial government
borrowed PRs1.8 billion from the
PPF in FY2010. This amount has
yet amortized.
Subprogram 3 indicative action
not complied with.

Appendix 2

Subprogram 1 Actions

26

Policy Objective

Subprogram 1, Subprogram 2
and indicative Subprogram 3
actions complied with. PPF and
PGPIF rules were adopted in
2007 and 2010, respectively, with
clear fiduciary norms for fund
management. Management
committee was established in
2007, comprising six members
from the public sector and five
members from the private sector.
Management committee formed
three subcommittees:
investment, accounting and audit
compliance and human
resources. Each subcommittee
has two private members.
Investment policy was approved
by management committee in
2008. Central Depositary
Company of Pakistan was
appointed the Trustee on
27 September 2011, holding
custody of assets. The provincial
government appointed KPMG
Taseer Hadi & Company,
Chartered Accountants as the
external auditor in January 2010.

Policy Objective

Subprogram 1 Actions
(July 2006October
2007)
Proposed GPIF Law
submitted to Provincial
Assembly.

Subprogram 2 Actions
(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

GPIF Act enacted by provincial


assembly.

Contingent liabilities of the PPF


and the GPF as of June 2008
estimated and included in the
white paper for the FY2010
budget.

Pension scheme and GPF


expense report prepared in
line with Public Sector
Accounting Standard 25 and
integrated into FY2011
budget.

27

A policy note on key


priorities for pension
administration prepared
and a PAT appointed to
establish sound recordkeeping and
administration systems,
on the basis of a

Subprogram 1 and 2 actions


complied with. The GPIF Act (Act
V) was enacted by the provincial
assembly on 2 July 2009.
Subprogram 2 action complied
with. Contingent liabilities and
disclosures under IPSAS 25 are
reported in the White Paper to
the annual budget. Chapter 5.3 of
White Paper to budget FY2012
2013 has a detailed description
of automated pension
disbursement through pension
roll.
Subprogram 3 indicative action
complied with. Actuary submitted
an IPSAS 25 report based on
actuarial valuation as of 30 June
2009. The main components of
the report included (i) update of
actuarial assessments, including
Pension Fund and GPF liabilities
at 30 June 2010; (ii) reporting of
pension and GPF schemes in
line with IPSAS 25, for FY2009
2010; and (iii) report on test of
the accessibility and accuracy of
the payroll, pension, and GPF
records on the SAP R/3 system.
Actuarys report was discussed
with Finance Department and
PPF.
Subprogram 1 action complied
with. A policy note identifying the
key weaknesses of the pension
system was prepared in 2007.
PAT was established in 2007
comprising representatives from
the Finance Department and the
Office of the Accountant General.

Appendix 2

Subprograms 1 and 2:
Improve record-keeping and
administration to ensure
accurate and timely payment
of pension and GPF benefits.

Progress as of
December 2013

Subprogram 1 Actions

Subprogram 1: Improve
adequacy and coverage of
pension benefits.

(January 2008September 2009)

PAT to launch testing of


alternative procedures to
facilitate efficiency and accuracy
of data gathering, validation, and
entry of historic GPF records.
The Office of the AccountantGeneral has completed data
entry in SAP/R3 database for
(i) 988,338 employees,
(ii) 165,899 pensioners, and
(iii) 782,443 GPF records, of
which 162,587 records have
been updated based on ledger
books excluding missing
subscriptions.
Subprogram 2 indicative actions
(worded in Subprogram 1 RRP):
Reform agenda adopted on the
basis of a comprehensive review
of existing pension and GPF
benefits, coverage, and
contributions.
In-depth actuarial analysis
conducted to fully assess implicit
pension liabilities and to guide
parametric and systematic
reforms.

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

Data gathering, validation,


and entry of historic GPF
records implemented.

Subprogram 2 and Subprogram 3


indicative actions complied with.

PAT to confirm data entry in


SAP/R3 database completed
for most civil servants on
payroll, pensioners, and
GPF records.

Subprogram 2 and Subprogram 3


indicative actions complied with.
From January 2013, all retirees
are enrolled in pension roll for
direct credit of pension into bank
account. PPF prepares pension
payment order and delivers to
pensioners.

Subprogram 3 indicative
actions (worded in
Subprogram 1 RRP):
Legal and regulatory
framework for reform
developed on the basis of a
comprehensive review of the
pension system and benefits
structure.

These indicative actions were


dropped at Subprogram 2
processing.

CPA 3: Subprogram 1 Civil Service Reform; Subprogram 2 Improve Civil Service Management
Subprogram 1: Establish
A CSR vision circulated
A CSR policy approved by the
E&TD and L&DD to
the institutional foundation for and a Civil Service
provincial cabinet to endorse and
implement CSR policy
civil service reforms and set
Management and Reform guide optimization of government through (i) functional review,
a vision for effectively
Task Force established to functions, reengineering of
(ii) business process
managing the one millionarticulate and guide CSR
business processes, and
reengineering, and

Subprogram 1 and 2 actions


complied with. Indicative
Subprogram 3 action not
complied with. The provincial
cabinet approved a CSR policy in

Appendix 2

(July 2006October
2007)
thorough assessment of
the systemic
weaknesses.

Subprogram 2 Actions

28

Policy Objective

Policy Objective

plus civil servants


Subprogram 2: Improve
functions, streamline
business processes, and
modernize human resource
management.

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)


introduction of performancebased human resource
management systems.

Subprogram 3 Indicative
Actions
(October 2009March 2011)
(iii) completed human
resource reforms
Implementation of CSR
policy initiated in
departments of health,
irrigation and power, and
higher education.

Progress as of
December 2013

August 2009. The Civil Service


Management and Reform Task
Force was notified on
6 September 2007 and chaired
by the chief secretary. Last
meeting was in May 2008.
Additional Chief Secretary was
appointed as the focal person for
CSR but during the review
mission in June 2010, Additional
Chief Secretary was not aware of
the continued role of the Civil
Service Management and
Reform Task Force. By that time,
there was little or no traction on
the reform. S&GAD was
established to serve as
secretariat. PRMP conducted
sensitization workshops (E&TD,
L&DD, DOH, DI&P, HED, HUD,
MPDD, P&DD) regarding CSR
policy and its implementation on
27 January 2011 and 12 March
2011.

Appendix 2

29

(July 2006October
2007)
Coordination of CSR
efforts improved by
upgrading the Civil
Service Change
Management Unit.

Subprogram 1: Strengthen
civil service HRM to deliver
public services efficiently with
adequate incentives.

CSR change
management process
initiated by designating
change management
agents in all 40 provincial
and 35 districts.
A working group for
reviewing human
resources policies,
chaired by the additional
chief secretary, notified.
First batches of civil
servants recruited under
the newly established
Provincial Management
Service, leading to the
development of a
professional
management cadre

Subprogram 2 Actions
(January 2008September 2009)
PPSC approved a key
recommendation on adopting a
more efficient approach to
scrutinizing civil service
applications.

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

PPSC to (i) complete


functional review on civil
servant recruitment and an
action plan for business
process reengineering, and
(ii) implement some
recommendations.

Subprogram 1, Subprogram 2
and indicative Subprogram 3
actions complied with. The
change management unit was
transformed to the Public Policy
and Change Management Wing
as the secretariat for the task
force. In August 2009, PPSC
adopted a new procedure that
moved away from interviewing all
candidates to only those who are
shortlisted, which significantly
reduced recruitment time.
Functional reviews, business
process reengineering, and
human resources reviews of
PPSC were completed in 2009.
However, new management of
PPSC did not agree with the
results of the reviews.
Subprogram 1 action complied
with. Change management
agents were appointed in all
40 provincial departments and 35
districts.

Appendix 2

Subprogram 1 Actions

30

Policy Objective

Subprogram 1 action complied


with. Human resources working
group, chaired by the additional
chief secretary, is established.
Contract Employment Policy
(2003) was reviewed.
Subprogram 1 action complied
with.

Policy Objective

Subprograms 1 and 2:
Strengthen the capacity of
civil servants.

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)
Competitive and incentive
based recruitment system
adopted for managing
development projects and
programs.
At least eight core
departments identified for
piloting a performance
based HRM system in at
least one unit/section in
each department.
Working group for
reviewing the Rules of
Business established.
MPDD designated as the
principal capacity-building
arm for public servants,
and modernization of
MPDD started.

(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

Subprogram 1 action complied


with.

Subprogram 1 action complied


with.

Subprogram 1 action complied


with.
Government training strategy
approved by the chief minister.

Gender mainstreaming
training adopted as a
regular part of MPDD
training curriculum.
Departmental training
budget allocated.

MPDD included gender in all


modules and customized courses
accordingly.

Departmental training
budget allocated.

FY2011 budget allocated


PRs100 million block allocation.

MPDD to establish training


partnership with reputable
international institutions.

MPDD had collaboration with


Singapore Civil Service College
but it was discontinued. The
provincial government is running
its training program equivalent to
$1 million a year to train staff
overseas. Partnership with Asian
Institute of Technology has been
established. About 180 staff
received at Asian Institute of

31

Subprogram 1, Subprogram 2
and indicative Subprogram 3
actions complied with. Strategy
was approved in September
2009 by the chief minister.

Appendix 2

Government training
strategy approved by the
cabinet.

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

Automated training systems


adopted in MPDD.

A provincial capacity
building framework for
civil service training
developed.

E&TD and L&DD to


implement civil service
reform policy through (i)
functional review, (ii)
business process
reengineering, and (iii)
completed human resource
reforms.

Management Information System


outline was developed, but it was
not implemented pending
recruitment of information
technology staff.
Subprogram 1 action complied
with. A provincial capacity
building framework for civil
service training was developed
under Subprogram 1 and
expanded in Subprogram 2 to
cover local government training.
PPSC, E&TD, and L&DD have
completed benchmarking and
identified key performance
indicators, focusing on strategic,
functional, performance, and
process aspects.

Citizens feedback
mechanism designed, and
implementation begun, for
L&DD and E&TD to gauge
public opinions on service
delivery.

Surveys were designed for both


pilot departments as part of the
benchmarking report. L&DD &
E&TD conducted survey and
included the finding in the report
(3 September 2010).

Based on pilot testing in


E&TD and L&DD, provincial
civil service human resource
management policies and
regulations to be reviewed
and revised to improve
efficiency and effectiveness
of civil service management
and service delivery.

Action was not performed.

Appendix 2

Technology.

32

Policy Objective

Policy Objective

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

S&GAD to study the causes


and effects and recommend
measures for addressing
issues related to (i) frequent
transfer and short tenure;
(ii) fringe benefits and need
for monetization; and
(iii) civil servant grade,
cadre, and compensation
issues and then implement
recommendations by
adopting new or revised
policies.

The Pay and Pension


Commission reviewed CSR
policies on tenure, monetization
of benefits, and other
compensation issues. However,
the federal government did not
follow Pay and Pension
Commission recommendations.
Instead, a 50% increase in nonpensionable salary and 15%
increase in monetization of
medical allowance was
approved. S&GAD developed a
human resources MIS.
Sensitization workshop
conducted on 27 January 2011
and 12 March 2011 for E&TD,
L&DD, MPDD, DI&P, HED,
HUD, DOH, P&DD, etc.
Subprogram 1 action complied
with. PSD committee was notified
in September 2007 and chaired
by the chair of the P&DD board.

Appendix 2

CPA 4: Subprogram 1 Private Sector Development; Subprogram 2 Promote Private Sector Participation
Subprogram 1: Strengthen
A PSD committee
public sector support for
(including terms of
private sector development,
reference) established
with the aim of boosting
and made operational to
private sector share of gross
lead PSD initiatives.
provincial product to 40% by
2012 (from 30% in 2006).
Communication strategy
adopted to effectively
promote core labor,
international quality, and
environment, to boost
Punjabs
competitiveness.

33

Subprogram 2: Promote
PPP for infrastructure and
social service delivery.

Subprogram 2 Actions

(July 2006October
2007)
A PPP cell established in
P&DD to draft policy and
regulatory framework for
PPP, and support
development of PPPs in
a systematic manner.

(January 2008September 2009)

Subprogram 3 Indicative
Actions
(October 2009March 2011)

Progress as of
December 2013

Subprogram 1 action complied


with. PPP cell established in
P&DD in 2008.

PPP policy approved by the


provincial cabinet to specify the
governments objectives for
private sector participation in
infrastructure development and
the principles for achieving these
objectives.

PPP law submitted to the


provincial assembly or approved
by the provincial cabinet for
implementing the PPP policy.
P&DD hired head (or acting

Subprogram 2 action complied


with.

PPP steering committee


established.

Indicative Subprogram 3 action


complied with. The PPP steering
committee was established in
2010.

Hiring of professional staff


based on staffing level
indicated in the PC-I
completed for the PPP cell.

Indicative Subprogram 3 action


not complied with.

PPP risk management


framework established and
PPP risk management unit
in the Finance Department
operationalized.

Indicative Subprogram 3 action


complied with.

Policies, guidelines, and


regulations on lands
acquisition, environmental,
and social safeguards
pertaining to PPP project
developed.

Indicative Subprogram 3 actions


complied with.

Subprogram 2 action complied


with. PPP law was enacted in
July 2010.
Subprogram 2 action complied

Appendix 2

Subprogram 1: Promote
PPPs

Subprogram 1 Actions

34

Policy Objective

Policy Objective

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)


head) and at least two
professional staff for the PPP
cell.
Project development facility
guidelines approved by the
provincial cabinet and facility
financed through budget
allocation of $1 million equivalent
under PC-I.

CPA5: Achieve development results


Subprogram 2: Adopt result
framework.

Subprogram 3 Indicative
Actions
(October 2009March 2011)
with.

Detailed PPP operational


guidelines adopted by the
PPP cell

A list of PPP projects identified


by P&DD/

Concessional agreements
signed for at least two PPP
projects.

Punjabs strategy for economic


growth and service delivery
approved by the provincial
cabinet.
A results framework working
group chaired by the P&DD
chairperson, established for the
introduction of Punjabs result
framework.

Punjabs result framework


approved by cabinet.

Subprogram 1 and 2 actions


complied with. Project
development facility guidelines
were approved by the provincial
cabinet in 2009; $1 million was
allocated to the facility in FY2010
budget
Subprogram 2 action complied
with. Indicative Subprogram 3
action not complied with. A
preliminary list of potential
candidate PPP projects was
identified by the Department of
Transport and Food Department.
Time frame envisaged under
PPP law did not allow signing off
concessional agreements of any
projects in 2012.
Subprogram 2 action complied
with. Subprogram 3 indicative
action not complied with.

35

Subprogram 2 action complied


with. A working group chaired by
the P&DD chairperson was
established. RBM Unit is in place
with one advisor, one technical
consultant, one information and
communication technology
expert, one policy expert, and a
research analyst.
Subprogram 2 action complied
with. A draft results framework,
for the province and key sectors,
was adopted as a working
document by the working group.

Appendix 2

Draft result framework for the


province and key sectors linking
key development impact,
outcomes, and outputs with
resources and enabling systems

Progress as of
December 2013

Subprogram 1 Actions

Subprogram 2 Actions

(July 2006October
2007)

(January 2008September 2009)

Progress as of
December 2013

RBM nodes (with departmentspecific terms of reference


notified in three departments.
RBM pilot tested in L&DD, DI&P,
HED from FY20112012.
Indicative Subprogram 3 action
not complied with.

First annual progress report


on implementing the result
framework prepared by the
result framework working
group and finding presented
to the cabinet and provincial
assembly and this initiative
institutionalized.
Gender equity indicators for
Gender reform action plan
Subprogram 2 action complied
health and education integrated
implementation on public
with. Subprogram 3 indicative
in Punjab's results-based
financial management, civil
action not complied with.
management framework.
service reform, service
delivery, and economic
empowerment assessed;
annual progress report
prepared; and further gender
mainstreaming actions in
line with program reforms
identified.
ADB = Asian Development Bank; ADP = annual development program; BCC = budget call circular; CPA = core policy area; CSR = civil service reform;
DI&P = Department of Irrigation and Power; DOH = Department of Health; E&TD = Exercise and Taxation Department; GPF = General Provident Fund;
GPIF = General Provident Investment Fund; HED = Higher Education Department; HRM = Human Resource Management; HUD = Housing and Urban
Development Department; IPSAS = International Public Sector Accounting Standard; L&DD = Livestock and Dairy Department; MDG = Millennium Development
Goal; MPDD = Management and Professional Development Department; MTBF = medium-term budget framework; P&DD = Planning and Development
Department; PAT = Pension Administration Taskforce; PC-I = Planning Commission Pro-Forma-I; PPF = Punjab Pension Fund; PPP = publicprivate partnership;
PPSC = Punjab Public Service Commission; PRMP = Punjab Resource Management Program; PSD = private sector development; RBM = results-based
management; RRP = report and recommendation of the President; S&GAD = Services and General Administration Department; SAP/R3 = Systems, Applications,
and Products in Data Processing/Third Generation; UIPT = urban immovable property tax.
Sources: Asian Development Bank and the government of Punjab.

Appendix 2

and processes adopted as a


working document by the result
framework working group.

Subprogram 3 Indicative
Actions
(October 2009March 2011)

36

Policy Objective

Appendix 3

37

EFFECTIVE GENDER MAINSTREAMING REPORTING


Effective Gender Mainstreaming Targets
MPDD training days increased by 20% from
2008 to 2009 and gender-sensitization
workshops held
Gender mainstreaming training adopted as a
regular part of MPDD training curriculum
MPDD included gender in all modules and
customized courses accordingly
Gender mainstreaming pre-budget
consultations held
Gender-responsive budgeting introduced in
the health and education departments from
FY2010
Gender mainstreaming workshops in the areas
of public financial management, civil service
reforms, and economic empowerment held
At least 50,000 more girls benefit from a girls
stipend program each year.
Gender equity indicators for health and
education integrated in Punjabs results-based
management framework
Punjabs draft result based management
framework developed, articulating service
delivery outcome targets in education, health,
and infrastructure sectors, and on reducing
gender disparities

Status
Gender sensitization workshops were held.
Information on percentage increase trainings
is not available.
Yes.
Yes.
Yes.
Yes. Budget statements with gender elements
were prepared to assess whether public
investment is gender-sensitive and balanced.
Workshops were conducted.

Information is not available.


Indicators integrated but Punjabs resultsbased management framework was not
approved.
Indicators integrated but Punjabs resultsbased management framework was not
approved.

MPDD = Management and Professional Development Department.


Source: Asian Development Bank.

1.
The national gender reform action plan (GRAP) was developed under the
Decentralization Support Program and approved by the national assembly. The GRAP for
Punjab was also approved. Subprogram 2 of the Punjab Government Efficiency Improvement
Program attempted to mainstream gender reforms and support gender equity in Punjab.
2.
Two pre-budget seminars were conducted to increase awareness of gender-sensitive
budgeting in FY2010. Resource allocation for the GRAP was increased from PRs70 million in
FY2008 to PRs148 million in FY2010. Gender mainstreaming units have been established in
seven pilot departments. Gender support units have been established in 27 districts. As part of
Subprogram 2, the gender support units conducted a review of 179 project documents, and
these were subsequently revised to reflect a more gender-balanced approach. The provincial
government prepared budget statements with gender elements for the districts of Rajanpur and
Gujrat, and for the provincial government as a whole, to gauge whether public investment is
gender-sensitive and balanced. The findings were incorporated into the gender section of the
budget call circular for FY2010. All these efforts have contributed to gender-sensitive budgeting
and planning. The government has established the Directorate of Womens Development to be
responsible for carrying out GRAP activities. The cluster program supported gender-focused
capacity building and conducted a series of workshops on gender equity sensitization in Punjab.
Results-based management (RBM) would have helped mainstream gender equity through
increased fiscal discipline. However, Punjabs RBM was developed but not approved.

38

Appendix 4

STATUS OF COMPLIANCE WITH LOAN COVENANTS


LOAN 2385-PAK LOAN AGREEMENT
LOAN COVENANTS

STATUS

ARTICLE IV - Particular Covenants


Section 4.01. (a) The Borrower shall, and shall cause Punjab to,
carry out the Program with due diligence and efficiency and in
conformity with sound administrative, financial and public
management practices.

Complied with.

(b)
In the carrying out of the Program, the Borrower shall,
and shall cause Punjab to, perform all obligations set forth in
Schedule 5 to this Loan Agreement.

Complied with.

Section 4.02. The Borrower shall, and shall cause Punjab to,
make available, promptly as needed, the funds, facilities,
services and other resources which are required, in addition to
the proceeds of the Loan, for the carrying out of the Program.

Complied with.

Section 4.03. The Borrower shall, and shall cause Punjab to,
ensure that the activities of its departments and agencies with
respect to the carrying out of the Program are conducted and
coordinated in accordance with sound administrative policies
and procedures.

Complied with.

Section 4.04. (a) The Borrower shall maintain records and


documents adequate to identify the Eligible items financed out of
the proceeds of the Loan and to indicate the progress of the
Program.

Complied with.

(b)
The Borrower shall enable ADBs representatives to
inspect any relevant records and documents referred to in
paragraph (a) of this Section.

Complied with.

Section 4.05. As part of the reports and information referred to in


Section 7.04 of the Loan Regulations, the Borrower shall furnish,
or cause to be furnished, to ADB all such reports and
information as ADB shall reasonably request concerning: (i) the
Counterpart Funds and the use thereof; and (ii) the
implementation of the Program, including the accomplishment of
the targets and carrying out of the actions set out in the Policy
Letter.

Complied with.

SCHEDULE 3 - Withdrawal of Loan Proceeds


1.
(a) The withdrawal from the Loan Account shall be
made for the financing of the cost of Eligible Items.

Complied with.

(b)
The withdrawal from the Loan Account shall not be
made in respect of any expenditure which have been financed
by credits from official international or bilateral aid agencies or
any other loans made by ADB.

Complied with.

3.

Complied with.

(a)

An application for withdrawal from the Loan Account

Appendix 4

shall be submitted to ADB by the Borrower and shall be in a


form satisfactory to ADB.
(b)
Such withdrawal application shall be accompanied by a
certificate of the Borrower confirming that: (i) in the case the
proceeds of the Loan will finance imports already made, the
value of the Eligible Imports in the period concerned exceeded
the amount of the requested withdrawal; or (ii) in the case the
proceeds of the Loan will finance items to be imported, the value
of the Eligible Imports in the immediately preceding one year
period was equal to or greater than the amount of the requested
withdrawal plus all other amounts expected to be withdrawn
from the Loan Account during the succeeding year.

Complied with.

(c)
For the purposes of this paragraph, the term Eligible
Imports means the total imports of the Borrower during the
relevant period minus the following imports during the same
period:

Complied with.

(i)
(ii)
(iii)

imports from countries which are not members


of ADB;
imports for ineligible items specified in
Attachment 1 to this Schedule; and
imports financed from credits from official
international or bilateral aid agencies or any
other loans made by ADB.

(d)
The Borrower shall allow experts appointed by ADB to
verify the value of Eligible Imports during any period in respect
of which the Borrower has certified the value of Eligible Imports
in its withdrawal application.

Complied with.

4. (a) Prior to submitting the application to ADB for withdrawal


from the Loan Account, the Borrower shall open an account (the
Deposit Account) at the State Bank of Pakistan into which all
withdrawals from the Loan Account shall be deposited. The
Deposit Account shall be established, managed and liquidated
in accordance with terms and conditions satisfactory to ADB.

Complied with.

(b)
Separate accounts and records in respect of the Deposit
Account shall be maintained in accordance with consistently
maintained sound accounting principles. Upon ADBs request,
the Borrower shall have the Deposit Account audited by
independent auditors, whose qualifications, experience and
terms of reference are acceptable to ADB, in accordance with
appropriate auditing standards. Promptly after their preparation
but in any event not later than six (6) months after the date of
ADBs request, certified copies of such audited accounts and
records shall be furnished to ADB, all in the English language.

Complied with.

(c)
Throughout the Program implementation period, the
Borrower shall submit trade statistics and any other information
as ADB may require from time to time to assess the Borrowers
compliance with the formula for determining Eligible Imports.

Complied with.

39

40

Appendix 4

5. The Loan proceeds shall be disbursed in a single tranche


upon effectiveness of this Loan Agreement.
SCHEDULE 4 - Procurement
1.
Except as ADB may otherwise agree, the procedures
referred to in the following paragraphs of this Schedule shall
apply in the procurement of Eligible Items to be financed out of
the proceeds of the Loan.

Complied with.

Complied with.

2.
(a) Except as provided in paragraph 2(b) below, each
contract for Eligible Items shall be awarded on the basis of
either the purchasers normal commercial procurement
practices, in the case of procurement by the private sector, or
the Borrowers prescribed procurement procedures, in the case
of procurement by the public sector, having due regard for the
principles of economy and efficiency.

Complied with.

(b)
Each supply contract for Eligible Items which are
commonly traded commodities shall be awarded on the basis of
procedures appropriate to the trade and acceptable to ADB.

Complied with.

3.
(a) The Borrower shall ensure that all ADB-financed
goods and services procured (including but without limitation all
computer hardware, software and systems, whether separately
procured or incorporated within other goods and services
procured) do not violate or infringe any industrial property or
intellectual property right or claim of any third party.

Complied with.

(b)
The Borrower shall ensure that all ADB-financed
contracts for the procurement of goods and services contain
appropriate representations, warranties and if appropriate,
indemnities from the contractor or supplier with respect to the
matters referred to in subparagraph (a) of this paragraph.

Complied with.

SCHEDULE 5 - Program Implementation and Other Matters


Project Executing and Implementing Agencies
1. The Borrower shall, and shall cause Punjab to, ensure that
the Project execution and implementation arrangements set
forth in this Loan Agreement shall be carried out in accordance
with the terms of this Loan Agreement. Specifically,
(a)
the P&DD shall be the Project Executing Agency for the
Program;
(b) the principal implementing agencies for the Program shall be:
(i)

(ii)
(iii)

for Core Policy Action 1, the Finance


Department, the P&DD, Department of Health,
and Department of Irrigation and Power;
for Core Policy Action 2, the Finance
Department;
for Core Policy Action 3, the Services and
General Administration Department (including
the Public Policy and Change Management
Wing) and the Management and Professional
Development Department; and

Complied with.

Complied with.

Complied with.
Complied with.

Appendix 4

(iv)

for Core Policy Action 4, the Commerce and


Investment
Department,
the
Industries
Department, the Labour Department and the
Pⅅ

Complied with.

(c)
the Steering Committee shall provide guidance for the
implementation of the Program. The Steering Committee shall
be chaired by the Chief Secretary and shall meet at least twice a
year during the implementation of the Program;

Complied with.

(d)
the Executive Committee shall oversee overall
implementation of the Program and approve TA proposals under
the TA Project. The Executive Committee shall be chaired by
the P&D Chairman and shall meet at least once every three
months during the implementation of the Program; and

Complied with.

(e)
the PMU shall coordinate the efforts of the implementing
agencies. The PMU shall also be the secretariat to the Steering
Committee and the Executive Committee.

Complied with.

2.
The Borrower shall, and shall cause Punjab to, ensure
that: (a) the Chief Secretary, through the Steering Committee,
shall oversee the overall implementation of the Program and
resolve any difficulties arising from the different implementing
agencies; (b) the Chairman P&D shall, through the Executive
Committee, be responsible for coordination and management of
the Program and shall report to the Chief Secretary on
implementation progress; and (c) critical Program staff shall
remain in their positions on a full-time basis for a reasonable
duration to ensure continuity in the implementation of the
Program.

Complied with.

Continuity and Coordination of Reforms


3.
The Borrower shall, and shall cause Punjab to: (a) carry
out the policies and actions in accordance with the schedule of
reforms in the Policy Matrix and ensure that the reforms are
sustained for and beyond the duration of the Program period;
and (b) carry out its obligations as stipulated in this Schedule,
this Loan Agreement and the Program Agreement, in a timely
manner.

4.
The Borrower shall ensure that adequate information be
made available to Punjab to facilitate implementation of policies
and actions in the Program that are connected with, or can be
affected by, federal initiatives.

Partly complied with. Start of


implementation was delayed
due to security reasons which
affected implementation
schedule of the program.
Moreover, the GoPb pursued
reforms but interest dissipated
with the reduction of SP2 and
cancellation of SP3.
Complied with.

Policy Dialogue
5.
The Borrower shall, and shall cause Punjab to, keep
ADB informed of, and the Borrower and ADB shall from time to
time exchange views on, the progress made in carrying out the
Program.

Complied with.

41

42

Appendix 4

6.
The Borrower shall, and shall cause Punjab to, engage
in policy dialogue with ADB, in a timely manner, on problems
and constraints encountered during Program implementation
and on appropriate measures to overcome or mitigate such
problems and constraints.

Complied with.

7.
The Borrower shall, and shall cause Punjab to, keep
ADB informed of policy discussions with other multilateral or
bilateral agencies that have implications for implementation of
the Program, and shall provide ADB with an opportunity to
comment on any resulting policy proposals. The Borrower shall,
and shall cause Punjab to, take ADBs views into consideration
before finalizing and implementing any such proposals.

Complied with.

Counterpart Funds
8.
The Borrower shall, and shall cause Punjab to, ensure
that the Counterpart Funds shall be used, first, to support the
adjustment cost for reforms to be initiated and implemented
under the Program, and, second, to finance expenditures for
the general development purposes of Punjab.

Partly complied with. The


improvement of the pension
system as originally planned
was not completed. Time and
resources were expended in
setting up the pension fund and
making it operational, but it was
not adequately capitalized.

9.
Notwithstanding the generality of paragraph 8 of this
Schedule, Punjab shall:
(a)
with respect to the existing allocation in the Public
Accounts of Rs12 billion (approximately $200 million) to the
PPF and the GPIF, transfer the amounts for this allocation to
the accounts of the PPF and the GPIF in the Bank of Punjab
before the end of Financial Year 2009 through (for the
avoidance of doubt, the eventual apportionment of the amounts
between the PPF and the GPIF shall be determined by Punjab):
(i)

(ii)

transferring Rs6 billion (approximately $101.7


million) before the end of Financial Year 2008;
and
transferring Rs6 billion (approximately $101.7
million) before the end of Financial Year 2009;
and

(b)
in capitalizing the PPF and the GPIF with a minimum
aggregate amount of Rs100 billion (approximately $1.7 billion)
by Financial Year 2015 and of which the equivalent of Rs5.9
billion ($100 million) of the aggregate amount shall be derived
from the Counterpart Funds (for the avoidance of doubt, the

Partly complied with. The


government transferred a total
of PRs12 billion to the PPF in
FY2009FY2010 but withdrew
PRs1.8 billion during 2009
2010. The amount has not been
returned as of preparation of
the PCR. No budgetary transfer
has been made since 2010,
despite the revised pension
funding strategy becoming part
of Punjabs MTFF 2009-2012;
thus
only
10%
of
the
commitment has been met.
Partly complied with. Refer to
above.

Appendix 4

eventual apportionment of the aggregate amount between the


PPF and the GPIF shall be determined by Punjab):
(i)
(ii)

(iii)

(iv)

allocate Rs6 billion (approximately $101.7


million) for Financial Year 2007;
through the Medium-Term Budget Framework
for Financial Years 2008 to 2010, allocate Rs8
billion (approximately $135.6 million) for
Financial
Year
2008,
Rs10
billion
(approximately $169.5 million) for Financial
Year 2009 and Rs14 billion (approximately
$237.3 million) for Financial Year 2010;
through the Medium-Term Budget Framework
for Financial Years 2011 to 2013, allocate an
amount proportionate to Punjabs budget for
each such Financial Year, such amount to be
of an increasing order; and
through the Medium-Term Budget Framework
for Financial Years 2014 to 2016, allocate an
amount proportionate to Punjabs budget for
the Financial Years 2014 and 2015, such
amount to be of an increasing order; and

(c)
for the purpose of capitalizing the PPF and the GPIF as
described in subparagraph (b) above:

Partly complied with.

(i)

append the Funding Strategy to the respective


Medium-Term Budget Frameworks; and
(ii)
transfer the respective amounts to the
accounts of the PPF and the GPIF in
commercial bank(s) that meets the prudential
regulatory requirements of the State Bank of
Pakistan before the end of the respective
Financial Year.
Community Stakeholders Consultation and Participation
10.
The Borrower shall, and shall cause Punjab to, ensure
that the reform process shall involve periodic consultations with
non-government actors and civil society organizations and
provide public access to information (both on proposed reforms
and progress with implementation).

Complied with.

Review and Evaluation of the Program


11.
Without limiting the generality of Section 4.05 of this
Loan Agreement, the Borrower shall, and shall cause Punjab to:
(a) prepare quarterly progress reports and an annual report on
Program implementation for submission to ADB and regularly
update the Program website; and (b) prepare an annual report
on its budget performance not later than six months after the
conclusion of each Financial Year.

Not complied with.

12. The Borrower shall, and shall cause Punjab to, undertake
review of the Program, with the participation of ADB, for the
design of subprograms 2 and 3 for the Program Cluster based
on experiences gained under the Program, the findings and

Complied with.

43

44

Appendix 4

recommendations of the TA Project and Advisory TA and


changes in circumstances to the external environment. Pursuant
to the review, Punjab shall submit a report to ADB
recommending revisions to the indicative reforms for
subprograms 2 and 3.
13. The Borrower acknowledges, and shall cause Punjab to
acknowledge, that the review process described in paragraph 12
of this Schedule does not obligate ADB to make loans for any
further subprogram under the Program Cluster and that any
further subprogram is subject to ADB Board approval.

Complied with.

Accounting and Auditing


14. The Borrower shall ensure that the federal government and
Punjab shall maintain separate accounts and records for the
Loan in accordance with sound accounting principles. The
accounts shall be audited annually in accordance with standards
acceptable to ADB, and Punjab shall provide ADB with certified
copies of the audited accounts promptly after their preparation
(and no later than six months after the close of the Financial
Year for the relevant accounts).

Complied with.

LOAN 2385-PAK PROGRAM AGREEMENT


LOAN COVENANTS

STATUS

ARTICLE II Particular Covenants


Section 2.01. (a) Punjab shall carry out the Program with due
diligence and efficiency, and in conformity with sound
administrative, financial, environmental and public resource
management practices.

Complied with.

(b)
In the carrying out of the Program and operation of the
Program facilities, Punjab shall perform all obligations set forth
in the Loan Agreement to the extent that they are applicable to
Punjab.

Complied with.

Section 2.02. Punjab shall make available, promptly as needed,


the funds, facilities, services, equipment and other resources
which are required, in addition to the proceeds of the Loan, for
the carrying out of the Program.

Complied with.

Section 2.03. (a)


In the carrying out of the Project,
Punjab shall employ competent and qualified consultants and
contractors, acceptable to ADB, to an extent and upon terms
and conditions satisfactory to ADB.

Complied with.

(b)
Except as ADB may otherwise agree, all goods, works
and consulting services to be financed out of the proceeds of the
Loan shall be procured in accordance with the provisions of
Schedule 4 to the Loan Agreement. ADB may refuse to finance
a contract where goods, works or consulting services have not
been procured under procedures substantially in accordance

Complied with.

Appendix 4

with those agreed between the Borrower and ADB or where the
terms and conditions of the contract are not satisfactory to ADB.
Section 2.04. Punjab shall carry out the Program in accordance
with plans, specifications, work schedules and methods
acceptable to ADB. Punjab shall furnish, or cause to be
furnished, to ADB, promptly after their preparation, such plans,
specifications and work schedules and any material
modifications subsequently made therein, in such detail as ADB
shall reasonably request.

Partly complied with. Due to


security risks, overall
implementation was delayed,
affecting various activities
under the program.

Section 2.05. Punjab shall maintain, or cause to be maintained,


records and accounts adequate to identify the goods, works,
consulting services and other items of expenditure financed out
of the proceeds of the Loan, including the application of
Counterpart Funds as specified in paragraph 14 of Schedule 5
of the Loan Agreement, to disclose the use thereof in the
Program, to record the progress of the Program (including the
cost thereof) and to reflect, in accordance with consistently
maintained sound accounting principles, its operations and
financial condition.

Complied with.

Section 2.06. (a) ADB and Punjab shall cooperate fully to ensure
that the purposes of the Loan will be accomplished.

Complied with.

(b)
Punjab shall promptly inform ADB of any condition
which interferes with, or threatens to interfere with, the progress
of the Program, the performance of its obligations under this
Program Agreement, or the accomplishment of the purposes of
the Loan.

Complied with.

(c)
ADB and Punjab shall from time to time, at the request
of either party, exchange views through their representatives
with regard to any matters relating to the Program and the Loan.

Complied with.

Section 2.07. (a) Punjab shall furnish to ADB all such reports
and information as ADB shall reasonably request concerning: (i)
the Loan and the expenditure of the proceeds thereof; (ii) the
goods, works and consulting services and other items of
expenditure financed out of such proceeds; (iii) the Program; (iv)
the administration, operations and financial condition of Punjab
to the extent relevant to the Program; and (v) any other matters
relating to the purposes of the Loan.

Complied with.

(b)
Without limiting the generality of the foregoing, Punjab
shall furnish to ADB and the Borrower an annual report on its
budget performance not later than six months after the
conclusion of each Financial Year and quarterly and annual
reports on the implementation of the Program during the
Program period. Such reports shall be submitted in such form
and in such detail and within such a period as ADB shall
reasonably request, and shall indicate, among other things,
progress made and problems encountered during the period
under review, steps taken or proposed to be taken to remedy
these problems and proposed program of activities and

Complied with.

45

46

Appendix 4

expected progress during the following period.


(c)
Promptly after the completion of the Program, but in any
event not later than three (3) months thereafter or such later
date as ADB may agree for this purpose, Punjab shall prepare
and furnish to ADB a report, in such form and in such detail as
ADB shall reasonably request, on the execution and
implementation of the Program, including its cost, the
performance by Punjab its obligations under this Program
Agreement and the accomplishment of the purposes of the
Loan.

Complied with.

Section 2.08. (a) Punjab shall: (i) maintain separate accounts for
the Program and for its overall operations; (ii) have such
accounts and related financial statements (balance sheet,
statement of income and expenses, and related statements)
audited annually, in accordance with appropriate auditing
standards consistently applied, by independent auditors whose
qualifications, experience and terms of reference are acceptable
to ADB; and (iii) furnish to ADB, promptly after their preparation
but in any event not later than six (6) months after the close of
the Financial Year to which they relate, certified copies of such
audited accounts and financial statements and the report of the
auditors relating thereto (including the auditors' opinion on the
use of the Loan proceeds and compliance with the covenants of
the Loan Agreement as well as on the use of the procedures for
imprest account/statement of expenditures), all in the English
language. Punjab shall furnish to ADB such further information
concerning such accounts and financial statements and the
audit thereof as ADB shall from time to time reasonably request.

Complied with.

(b)
Punjab shall enable ADB, upon ADB's request, to
discuss Punjabs financial statements and its financial affairs
from time to time with the auditors appointed by Punjab pursuant
to Section 2.08(a) hereabove, and shall authorize and require
any representative of such auditors to participate in any such
discussions requested by ADB, provided that any such
discussion shall be conducted only in the presence of an
authorized officer of Punjab unless Punjab shall otherwise
agree.

Complied with.

Section 2.09. Punjab shall enable ADB's representatives to


inspect the Program facilities and relevant records and
documents relating to the Program, including the application of
Counterpart Funds as specified in paragraph 14 of Schedule 5
of the Loan Agreement.

Complied with.

Section 2.10. (a) Punjab shall, promptly as required, take all


action within its powers to implement and carry out the Program.

Complied with.

(b)
Punjab shall at all times conduct its business in
accordance with sound administrative, financial, environmental
and public resource management practices.
Section 2.11. Except as ADB may otherwise agree, Punjab shall
apply the proceeds of the Loan to the financing of expenditures

Complied with.

Appendix 4

on the Program in accordance with the provisions of the Loan


Agreement and this Program Agreement, and shall ensure that
all expenditures financed out of such proceeds are used
exclusively in the carrying out of the Program.

LOAN 2386-PAK LOAN AGREEMENT


LOAN COVENANTS

STATUS

ARTICLE IV - Particular Covenants


Section 4.01. In the carrying out of the Project and operation of
the Project facilities, the Borrower shall perform, and cause
Punjab to perform, all obligations set forth in Schedule 5 to this
Loan Agreement.
Section 4.02. The Borrower shall, and shall cause Punjab to,
enable ADBs representatives to inspect the Project, the goods
and works financed out of the proceeds of the Loan and any
relevant records and documents.
Section 4.03. The Borrower shall take all action which shall be
necessary on its part to enable Punjab to

Complied with.

Section 4.03. The Borrower shall take all action which shall be
necessary on its part to enable Punjab to perform its obligations
under the Project Agreement, and shall not take or permit any
action which would interfere with the performance of such
obligations.

Complied with.

Complied with.

SCHEDULE 3 - Allocation and Withdrawal of Loan Proceeds


Disbursement Procedures
5. Except as ADB may otherwise agree, the Loan proceeds for
financing goods, works, consulting services and other items
shall be disbursed in accordance with ADBs Loan
Disbursement Handbook (2007, as amended from time to time)
(ADBs Loan Disbursement Handbook)

Complied with.

Imprest Account; Statement of Expenditures


6. (a) Except as ADB may otherwise agree, the Borrower shall
establish immediately after the Effective Date, an imprest
account at the National Bank of Pakistan. The imprest account
shall be established, managed, replenished and liquidated in
accordance with ADB's Loan Disbursement Handbook and
detailed arrangements agreed upon between the Borrower and
ADB. The currency of the imprest account shall be [insert
currency]. The initial amount to be deposited into the imprest
account shall not exceed the lower of: (i) the estimated
expenditure for the first six months of Project implementation; or
ii) the equivalent of ten (10) percent of the Loan amount.

Complied with.

(b) The statement of expenditures (SOE) procedure may be


used for reimbursement of eligible expenditures for the Project
and to liquidate advances provided into the imprest account, in
accordance with ADB's Loan Disbursement Handbook and
detailed arrangements agreed upon between the Borrower and
ADB. Any individual payment to be reimbursed or liquidated

Complied with.

47

48

Appendix 4

under the SOE procedure shall not exceed the equivalent of


$100,000.
SCHEDULE 4 - Procurement of Goods and Works, and
Consulting Services
General
1. All goods, works and consulting services, to be financed out
of the proceeds of the Loan shall be subject to and governed by
the Procurement Guidelines and the Consulting Guidelines,
respectively.
2. All terms used and not otherwise defined in this Loan
Agreement have the meanings provided in the Procurement
Guidelines and/or the Consulting Guidelines, as applicable.
Procurement for Goods and Works
1. Except as ADB may otherwise agree, goods and works shall
only be procured on the basis of the methods of procurement set
forth below:
International Competitive Bidding National Competitive Bidding
Shopping

Complied with.

Complied with.

Complied with.

2. The methods of procurement are subject to, among other


things, the detailed arrangements and threshold values set forth
in the Procurement Plan. The Borrower may only modify the
methods of procurement, the detailed arrangements or threshold
values with the prior agreement of ADB, and modifications must
be set out in updates to the Procurement Plan.
Selection of Consulting Services
1. Except as ADB may otherwise agree, the Borrower shall
apply quality- and cost-based selection for selecting and
engaging consulting services.
Industrial or Intellectual Property Rights
(a) The Borrower shall ensure that all goods and works procured
(including without limitation all computer hardware, software
and systems, whether separately procured or incorporated
within other goods and services procured) do not violate or
infringe any industrial property or intellectual property right or
claim of any third party.
(b) The Borrower shall ensure that all contracts for the
procurement of goods and works contain appropriate
representations, warranties and, if appropriate, indemnities
from the contractor or supplier with respect to the matters
referred to in subparagraph (a) of this paragraph.
2. The Borrower shall ensure that all ADB-financed contracts
with
consultants contain
appropriate representations,
warranties and, if appropriate, indemnities from the consultants
to ensure that the consulting services provided do not violate or
infringe any industrial property or intellectual property right or
claim of any third party

Complied with.

ADBs Review of Procurement Decisions


3. All contracts procured under international competitive bidding
procedures and contracts for consulting services shall be
subject to prior review by ADB, unless otherwise agreed
between the Borrower and ADB and set forth in the
Procurement Plan

Complied with.

Complied with.

Complied with.

Complied with.

Complied with.

Appendix 4

SCHEDULE 5 - Execution of Project and Operation of


Project Facilities; Financial Matters
Project Executing and Implementing Agencies
1. The Borrower shall, and shall cause Punjab to, ensure that
the Project execution and implementation arrangements set
forth in this Loan Agreement shall be carried out in accordance
with the terms of this Loan Agreement. Specifically,
(a)
the P&DD shall be the Project Executing Agency for the
Project;
(b) the principal implementing agencies for the Project shall be:
(i) for Component 1, the Finance Department, the P&DD, the
Department of Health and the Department of Irrigation and
Power;
(ii)
for Component 2, the Finance Department;
(iii)
for Component 3, the Services and General
Administration Department (including Public Policy and Change
Management Wing) and the Management and Professional
Development Department;
(iv)
for Component 4, the P&DD, the Commerce and
Investment Department, the Industries Department and the
Labour Department; and
(v)
for Component 5, the Pⅅ
(c) the Executive Committee shall oversee overall
implementation of the Program Cluster and approve technical
assistance proposals under the Project and the TA Project; and
(d) the PMU shall coordinate the efforts of the implementing
agencies. The PMU shall also be the secretariat to the Steering
Committee and the Executive Committee.
2. The Borrower shall, and shall cause Punjab to, take all steps
and actions, including provision of staff resources and funds to
ensure satisfactory completion of the Project in a timely manner.
Such staff resources and funds should include staff resources
and funds for the PMU.
Project Implementation

Complied with.

Complied with.

Complied with.
Complied with.
Complied with.

Partly complied with.

Complied with.
Complied with.

Complied with.

Complied with.

Complied with.

3. The Borrower shall, and shall cause Punjab, to ensure that


the Project is implemented in coordination with the Program
and that the outputs and recommendations from the Project are
taken into consideration during the review of the Program.
4. The Borrower shall, and shall cause Punjab to, ensure that
each Component shall be implemented to meet the policy
objectives, priorities and capacity building needs at the
governance, regulatory, and operational level.

Partly complied with.

Community Stakeholders Consultation and Participation


1. The Borrower shall, and shall cause Punjab to, ensure that
the reform process shall involve periodic consultations with
non-government actors and civil society organizations and
provide public access to information (both on proposed reforms
and progress with implementation).

Complied with.

49

50

Appendix 4

Reporting
1. The Borrower shall, and shall cause Punjab to, take all
reasonable steps to ensure that the consultants for each
Component prepare an inception report within four weeks of the
commencement of their services or as otherwise agreed
between ADB and Punjab. The Borrower shall, and shall cause
Punjab to ensure that: (i) each implementing agency submit
quarterly progress reports on the work of the consultants for
review; (ii) these quarterly reports are compiled and sent to
ADB; and (iii) a final report for each Component, including
complete documentation of all outputs, is submitted to ADB
within three months of the end of the assignment of a
consultant (the final report shall also incorporate comments
from ADB and Punjab on the draft final report).
2. In addition to regular coordination amongst the implementing
agencies, the Borrower shall, and shall cause Punjab to, ensure
that annual reviews and a comprehensive mid-term review on
all aspects of implementation shall be undertaken jointly by
Project, the implementing agencies and the consultants. The
annual reviews shall be undertaken before the end of each
Financial Year.
Accounting and Auditing

Partly complied with.

1. The Borrower shall ensure that the federal government and


Punjab shall maintain separate accounts and records for the
Loan in accordance with sound accounting principles. The
accounts shall be audited annually in accordance with
standards acceptable to ADB and Punjab shall provide ADB
with certified copies of the audited accounts promptly after their
preparation (and no later than six months after the close of the
fiscal year for the relevant accounts).

Complied with.

Complied with.

Project Performance Management System


1. The Borrower shall, and shall cause Punjab to, (i) set up a
project performance management system as agreed with ADB
by not later than two months from Board approval of the Project
and cause it to be operated throughout the Project
implementation period; and (ii) undertake periodic review of the
Project based on the project performance management system.

Partly complied with.

LOAN 2547-PAK LOAN AGREEMENT


LOAN COVENANTS

STATUS

ARTICLE IV - Particular Covenants


Section 4.01. (a)
The Borrower shall, and shall cause
Punjab to, carry out of the Program with due diligence and
efficiency, and in conformity with sound administrative, financial
and public management practices.

Complied with.

(b) In the carrying out of the Program, the Borrower shall, and
shall cause Punjab to, perform all obligations set forth in

Complied with.

Appendix 4

Schedule 5 to the Special Operations Loan Agreement.


Section 4.02. The Borrower shall, and shall cause Punjab to,
make available, promptly as needed, the funds, facilities,
services and other resources which are required, in addition to
the proceeds of the Loan, for the carrying out of the Program.

Complied with.

Section 4.03. The Borrower shall, and shall cause Punjab to,
ensure that the activities of its departments and agencies with
respect to the carrying out of the Program are conducted and
coordinated in accordance with sound administrative policies and
procedures.

Complied with.

Section 4.04. (a) The Borrower shall maintain, or cause to be


maintained, records and documents adequate to identify the
Eligible Items financed out of the proceeds of the Loan and to
indicate the progress of the Program.

Complied with.

(b)
The Borrower shall enable ADBs representatives to
inspect any relevant records and documents referred to in
paragraph (a) of this Section.

Complied with.

Section 4.05. (a) As part of the reports and information referred


to in Section 7.04 of the Loan Regulations, the Borrower shall
furnish, or cause to be furnished, to ADB all such reports and
information as ADB shall reasonably request concerning the
implementation of the Program, including the accomplishment of
the targets and carrying out of the actions set out in the Policy
Letter.

Complied with.

(b)
Without limiting the generality of the foregoing or Section
7.04 of the Loan Regulations, the Borrower shall furnish, or
cause to be furnished, to ADB semiannual reports on the
carrying out of the Program and on the accomplishment of the
targets and carrying out of the actions set out in the Policy Letter.

Not complied with.

ARTICLE V - Effectiveness
Section 5.01. The following are specified as additional conditions
to the effectiveness of this Loan Agreement for the purposes of
Section 10.01(f) of the Loan Regulations:
(a) the Special Operations Loan Agreement shall have
been duly executed and delivered on behalf of the
Borrower and all conditions precedent to its
effectiveness (other than a condition requiring the
effectiveness of this Loan Agreement) shall have been
fulfilled; and
(b) the policy actions for the Program as specified in
Schedule 6 to the Special Operations Loan Agreement
shall have been carried out to the satisfaction of ADB.
SCHEDULE 3 Withdrawal of Loan Proceeds
1.
Except as ADB may otherwise agree, the following
provisions of this Schedule shall apply to the withdrawal of Loan

Complied with.

51

52

Appendix 4

proceeds from the Loan Account.


2.
(a) Withdrawals from the Loan Account shall be made for
the financing of the cost of Eligible Items.

Complied with.

(b)
No withdrawal from the Loan Account shall be made in
respect of any expenditures which have been financed by credits
from official international or bilateral aid agencies or any other
loans made by ADB.

Complied with.

3.
(a) An application for withdrawal from the Loan Account
shall be submitted to ADB by the Borrower and shall be in a form
satisfactory to ADB.

Complied with.

(b)
Such withdrawal application shall be accompanied by a
certificate of the Borrower confirming that with respect to each
year during which the proceeds of the Loan are expected to be
disbursed, the value of the Eligible Imports is expected to be
equal to or greater than the amount of the Loan expected to be
disbursed during such year.

Complied with.

(c)
For the purposes of this paragraph, the term Eligible
Imports means the total imports of the Borrower during the
relevant period minus the following imports during the same
period:
(i)
imports from countries which are not members of
ADB;
(ii)
imports for ineligible items specified in the
Attachment to this Schedule; and
(iii)
imports financed from credits from official
international or bilateral aid agencies or any
other loans made by ADB.

Complied with.

(d)
The Borrower shall allow experts appointed by ADB to
verify the value of Eligible Imports during any period in respect of
which the Borrower has certified the value of Eligible Imports in
its withdrawal application.
4. (a) Prior to submitting the first application to ADB for
withdrawal from the Loan Account, the Borrower shall nominate
an account ("Deposit Account") at the State Bank of Pakistan
into which all withdrawals from the Loan Account shall be
deposited. The Deposit Account shall be established, managed
and liquidated in accordance with terms and conditions
satisfactory to ADB.

Complied with.

(b)
Separate accounts and records in respect of the Deposit
Account shall be maintained in accordance with consistently
maintained sound accounting principles. Upon ADBs request,
the Borrower shall have the Deposit Account audited by
independent auditors, whose qualifications, experience and
terms of reference are acceptable to ADB, in accordance with
appropriate auditing standards. Promptly after their preparation
but in any event not later than 6 months after the date of ADBs
request, certified copies of such audited accounts and records

Complied with.

Appendix 4

shall be furnished to ADB, all in the English language.


(c)
Throughout the Program implementation period, the
Borrower shall submit trade statistics and any other information
as ADB may require from time to time to assess the Borrowers
compliance with the formula for determining Eligible Imports.

Complied with.

5. The proceeds of the Loan shall be disbursed in a single


tranche upon effectiveness of this Loan Agreement.

Complied with.

SCHEDULE 4 - Procurement
1.
Except as ADB may otherwise agree, the procedures
referred to in the following paragraphs of this Schedule shall
apply in the procurement of Eligible Items to be financed out of
the proceeds of the Loan.
2.
(a) Except as provided in paragraph 2(b) below, each
contract for Eligible Items shall be awarded on the basis of either
the purchasers normal commercial procurement practices, in the
case of procurement by the private sector, or the Borrowers
prescribed procurement procedures, in the case of procurement
by the public sector, having due regard for the principles of
economy and efficiency.

Complied with.

(b)
Each supply contract for Eligible Items which are
commonly traded commodities shall be awarded on the basis of
procedures appropriate to the trade and acceptable to ADB.

Complied with.

LOAN 2548-PAK LOAN AGREEMENT


LOAN COVENANTS

STATUS

ARTICLE IV Particular Covenants


Section 4.01. In the carrying out of the Program, the Borrower
shall, and shall cause Punjab to, perform all obligations set forth
in Schedule 5 to this Loan Agreement.

Complied with.

Section 4.02. (a)


The Borrower shall maintain, or cause to
be maintained, records and documents adequate to identify the
Eligible Items financed out of the proceeds of the Loan and to
record the progress of the Program.

Complied with.

(b)
The Borrower shall enable ADBs representatives to
inspect any relevant records and documents referred to in
paragraph (a) of this Section.

Complied with.

Section 4.03. (a) As part of the reports and information referred


to in Section 6.05 of the Loan Regulations, the Borrower shall
furnish, or cause to be furnished, to ADB all such reports and
information as ADB shall reasonably request concerning the
implementation of the Program, including the accomplishment of
the targets and carrying out of the actions set out in the Policy
Letter.

Complied with.

53

54

Appendix 4

(b)
Without limiting the generality of the foregoing or Section
6.05 of the Loan Regulations, the Borrower shall furnish, or
cause to be furnished, to ADB semiannual reports on the
carrying out of the Program and on the accomplishment of the
targets and carrying out of the actions set out in the Policy Letter.
ARTICLE V Effectiveness
Section 5.01. The following are specified as additional conditions
to the effectiveness of this Loan Agreement for the purposes of
Section 9.01(f) of the Loan Regulations:
(a)
the Ordinary Operations Loan Agreement shall have
been duly executed and delivered on behalf of the
Borrower and all conditions precedent to its
effectiveness (other than a condition requiring the
effectiveness of this Loan Agreement) shall have been
fulfilled; and
(b)

Complied with.

the policy actions for the Program as specified in


Schedule 6 to this Loan Agreement shall have been
carried out to the satisfaction of ADB.

SCHEDULE 3 Withdrawal of Loan Proceeds


1.
Except as ADB may otherwise agree, the following
provisions of this Schedule shall apply to the withdrawal of Loan
proceeds from the Loan Account.
2.
(a) Withdrawals from the Loan Account shall be made for
the financing of the cost of Eligible Items.

Complied with.

(b)
No withdrawal from the Loan Account shall be made in
respect of any expenditures which have been financed by credits
from official international or bilateral aid agencies or any other
loans made by ADB.
3. (a) An application for withdrawal from the Loan Account shall
be submitted to ADB by the Borrower and shall be in a form
satisfactory to ADB.

Complied with.

(b)
Such withdrawal application shall be accompanied by a
certificate of the Borrower confirming that with respect to each
year during which the proceeds of the Loan are expected to be
disbursed, the value of the Eligible Imports is expected to be
equal to or greater than the amount of the Loan expected to be
disbursed during such year.
(c)
For the purposes of this paragraph, the term Eligible
Imports means the total imports of the Borrower during the
relevant period minus the following imports during the same
period:
(i)
(ii)
(iii)

imports from countries which are not members of


ADB;
imports for ineligible items specified in the
Attachment to this Schedule; and
imports financed from credits from official

Complied with.

Appendix 4

international or bilateral aid agencies or any


other loans made by ADB.
(d) The Borrower shall allow experts appointed by ADB to verify
the value of Eligible Imports during any period in respect of which
the Borrower has certified the value of Eligible Imports in its
withdrawal application.

Complied with.

4. (a) Prior to submitting the first application to ADB for


withdrawal from the Loan Account, the Borrower shall nominate
an account ("Deposit Account") at the State Bank of Pakistan
into which all withdrawals from the Loan Account shall be
deposited. The Deposit Account shall be established, managed
and liquidated in accordance with terms and conditions
satisfactory to ADB.

Complied with.

(b)
Separate accounts and records in respect of the Deposit
Account shall be maintained in accordance with consistently
maintained sound accounting principles. Upon ADBs request,
the Borrower shall have the Deposit Account audited by
independent auditors, whose qualifications, experience and
terms of reference are acceptable to ADB, in accordance with
appropriate auditing standards. Promptly after their preparation
but in any event not later than 6 months after the date of ADBs
request, certified copies of such audited accounts and records
shall be furnished to ADB, all in the English language.

Complied with.

(c)
Throughout the Program implementation period, the
Borrower shall submit trade statistics and any other information
as ADB may require from time to time to assess the Borrowers
compliance with the formula for determining Eligible Imports.

Complied with.

5. The proceeds of the Loan shall be disbursed in a single


tranche upon effectiveness of this Loan Agreement.
SCHEDULE 4 Procurement
1.
Except as ADB may otherwise agree, the procedures
referred to in the following paragraph of this Schedule shall
apply in the procurement of Eligible Items to be financed out of
the proceeds of the Loan.

Complied with.

2.
(a) Except as provided in subparagraph (b) of this
paragraph, each contract for Eligible Items shall be awarded on
the basis of either the purchasers normal commercial
procurement practices, in the case of procurement by the
private sector, or the Borrowers prescribed procurement
procedures, in the case of procurement by the public sector,
having due regard for the principles of economy and efficiency.
(b)
Each supply contract for Eligible Items which are
commonly traded commodities shall be awarded on the basis of
procedures appropriate to the trade and acceptable to ADB.

Complied with.

SCHEDULE 5 Program Implementation and Other Matters


Program Implementation
1.

The Borrower shall cause Punjab to appoint the Planning

Complied with.

55

56

Appendix 4

and Development Department as the Program Executing Agency


to be responsible for the overall implementation of the Program.
This includes coordinating the implementation of policy actions
by relevant departments and agencies in Punjab.
2.
The Planning and Development Department shall be
guided by a high-level steering committee. The steering
committee is supported by an executive committee which
convenes at least twice a year. The Program Management Unit
serves as the secretariat of the high-level steering committee
and the executive committee.

Complied with.

Policy Actions and Dialogue


3.
The Borrower shall, and shall cause Punjab to, ensure
that all policies adopted and actions taken under the Program, as
set forth in the Policy Letter and the Policy Matrix, shall continue
to be in effect for and beyond the duration of the Program.

Complied with.

4.
The Borrower shall, and shall cause Punjab to, keep
ADB informed of policy discussions with other multilateral and
bilateral aid agencies that may have implications for the
implementation of the Program and provide ADB with an
opportunity to comment on any resulting policy proposals. The
Borrower shall take into account ADBs views before finalizing
and implementing any such proposal.

Complied with.

Improve Expenditure Management

Complied with.

5. The Borrower shall, and shall cause Punjab to, provide 5


qualified technical staff designated for the implementation of the
MTBF in the budget wing of the Finance Department by 30
November 2009.
Program Monitoring and Review
6. The Borrower shall, and shall cause Punjab to, carry out
review of the Program with the participation of ADB for the
design of the third subprogram of the Program Cluster. The
review shall take into account experiences from Program
implementation and recommendations from ADB technical
assistance. The Borrower acknowledges that the review
described in this paragraph does not obligate ADB to provide
loans for any further subprogram under the Program Cluster
and that any such loans are subject to ADB Board approval.

Not complied with. Subprogram


3 was cancelled and the
tranche size of Subprogram 2
was reduced by half.

LOAN 2547/2548(SF)-PAK PROGRAM AGREEMENT


LOAN COVENANTS

STATUS

ARTICLE II Particular Covenants


Section 2.01. (a)
Punjab shall carry out the Program with
due diligence and efficiency, and in conformity with sound
administrative, financial and public management practices.

Complied with.

Appendix 4

(b)
In the carrying out of the Program, Punjab shall perform
all obligations set forth in the Special Operations Loan
Agreement to the extent that they are applicable to Punjab and in
this Program Agreement.
Section 2.02. Punjab shall make available, promptly as needed,
the funds, facilities, services and other resources which are
required, in addition to the proceeds of the Loans, for the
carrying out of the Program.

Complied with.

Section 2.03 Punjab shall maintain, or cause to be maintained,


records and accounts adequate to identify the goods, services
and other items of expenditure financed out of the Counterpart
Funds, to disclose the use thereof under the Program, to record
the progress of the Program (including the cost thereof) and to
reflect, in accordance with consistently maintained sound
accounting principles, its operations and financial condition.

Complied with.

Section 2.04. (a) ADB and Punjab shall cooperate fully to ensure
that the purposes of the Loans are accomplished.

Complied with.

(b)
Punjab shall promptly inform ADB of any condition which
interferes with, or threatens to interfere with, the progress of the
Program, the performance of its obligations under this Program
Agreement or the accomplishment of the purposes of the Loans.
(c)
ADB and Punjab shall from time to time, at the request of
either party, exchange views through their representatives with
regard to any matters relating to the Program and the Loans.
Section 2.05. (a) Punjab shall furnish to ADB all such reports and
information as ADB shall reasonably request concerning: (i) the
Counterpart Funds and the use thereof; (ii) the Program; (iii) the
administration, operations and financial condition of Punjab to
the extent relevant to the Program; and (iv) any other matters
relating to the purposes of the Loan.

Not complied with.

(b)
Without limiting the generality of the foregoing, Punjab
shall furnish to ADB an annual report on its budget performance
not later than 6 months after the conclusion of each Financial
Year and semi-annual reports on the implementation of the
Program during the Program period. Such reports shall be
submitted in such form and in such detail and within such a
period as ADB shall reasonably request, and shall indicate,
among other things, progress made and problems encountered
during the period under review, steps taken or proposed to be
taken to remedy these problems, and proposed program of
activities and expected progress during the following period

Not complied with.

(c)
Promptly after physical completion of the Program, but in
any event not later than 3 months thereafter or such later date as
ADB may agree for this purpose, Punjab shall prepare and
furnish to ADB a report, in such form and in such detail as ADB
shall reasonably request, on the execution and initial operation of
the Program, including its cost, the performance by Punjab of its

Complied with.

57

58

Appendix 4

obligations under this Program Agreement


accomplishment of the purposes of the Loan.

and

the

Section 2.06. Punjab shall enable ADB's representatives to


inspect the Program facilities and records and documents
relating to the Program.

Complied with.

Section 2.07. Except as ADB may otherwise agree, Punjab shall


apply the Counterpart Funds to the financing of expenditures on
the Program in accordance with the provisions of the Loan
Agreements and this Program Agreement, and ensure that all
expenditures financed out of such Counterpart Funds are used
exclusively in the carrying out of the Program.

Complied with.

SCHEDULE Program Implementation and Other Matters


Program Implementation
1.
Punjab shall appoint the Planning and Development
Department as the Program Executing Agency to be responsible
for the overall implementation of the Program. This includes
coordinating the implementation of policy actions by relevant
departments and agencies in Punjab.

Complied with.

2.
The Planning and Development Department shall be
guided by a high-level steering committee. The steering
committee is supported by an executive committee which
convenes at least twice a year. The Program Management Unit
serves as the secretariat of the high-level steering committee
and the executive committee.

Complied with.

Policy Actions and Dialogue


3.
Punjab ensures that all policies adopted and actions
taken under the Program, as set forth in the Policy Letter and the
Policy Matrix, shall continue to be in effect for and beyond the
duration of the Program.

Complied with.

4.
Punjab shall keep ADB informed of policy discussions
with other multilateral and bilateral aid agencies that may have
implications for the implementation of the Program and provide
ADB with an opportunity to comment on any resulting policy
proposals. The Borrower shall take into account ADBs views
before finalizing and implementing any such proposal.

Complied with.

MTBF Implementation

Complied with.

5. Punjab shall provide 5 qualified technical staff designated for


the implementation of the MTBF in the budget wing of the
Finance Department by 30 November 2009.

Appendix 4

Program Monitoring and Review


6. Punjab shall carry out review of the Program with the
participation of ADB for the design of the third subprogram of the
Program Cluster. The review shall take into account experiences
from Program implementation and recommendations from ADB
technical assistance.

Not complied with. Subprogram


3 was cancelled and the
tranche size of Subprogram 2
was reduced by half.

59

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