As the country needs foreign loans to bolster its dwindling reserves, cracks are apparently appearing in relations between Pakistan and the Asian Development Bank – once considered a friendly lender which has come to the country’s rescue in difficult times.

ADB, the largest lender to Pakistan, does not seem to have the sort of cordial relations that it enjoyed before 2010, according to sources in diplomatic circles and the finance ministry.On the one hand, Finance Minister Dr Abdul Hafeez Shaikh is reportedly giving less importance to the ADB’s top management, and on the other the lending agency has changed course on issues like Diamer Bhasha Dam.

In the latest episode, Shaikh apparently attempted to avoid a meeting with the visiting Director General of ADB for Central and West Asia Department, Klaus Gerhaeusser. According to finance ministry officials, Shaikh did not confirm his meeting with Gerhaeusser even after the latter had left for Islamabad.

On Wednesday, Shaikh’s personal staff told relevant officials that the minister was not well and would not be able to confirm the scheduled meeting for Thursday noon. They said he had not come to the office for the last two days because of ill health. Later, the meeting was postponed.

Afterwards, on the repeated insistence of the ADB’s Islamabad office, the meeting was arranged at the minister’s residence in the evening.
Shaikh was not available for comments.However, according to the Press Information Department, Shaikh met with Prime Minister Raja Pervez Ashraf on Thursday.

ADB lifelineIn 2008, when Pakistan was in deep financial crisis and was on the verge of default, almost all western bilateral and multilateral lenders blocked assistance in a bid to put pressure on Islamabad to sign a bailout agreement with the International Monetary Fund.

Even at that time, the ADB came forward and signed a $2.2 billion Accelerating Economic Transformation Programme in September 2008. It immediately released the first tranche of $500 million, helping Pakistan avoid possible default, said a former federal secretary, who spoke on condition of anonymity.

“ADB has remained a better development partner than the World Bank and has offered loans at preferential terms,” said an official of the Economic Affairs Division.Until the end of 2011, the bank had disbursed $16.8 billion to Pakistan, making it the single largest creditor. Despite that, Pakistan has tilted towards the World Bank because of its pro-US foreign policy.

Four and a half years gone, the country’s economy is again passing through tough times and this time all international lenders, including the ADB, have stopped offering budgetary support. This will put further pressure on the rupee which, in the face of depleting foreign currency reserves, has already crossed the 100 mark against the dollar.

One of the reasons behind the friction is said to be the preferential treatment the finance minister gives to Washington-based World Bank. Shaikh is a former employee of the bank.As the country’s finance minister Shaikh is a member of the ADB’s Board of Governors. However, out of three meetings held since he became the minister, he attended only one meeting in 2011 in Vietnam. ADB’s spokesperson in Pakistan Ismail Khan confirmed that Shaikh took part in one meeting.

The finance minister has also had limited engagement with ADB President Haruhiko Kuroda, but has held a number of meetings with the WB chief.Owing to the same reasons, the ADB president did not participate in a meeting of the Friends of Democratic Pakistan, held in Washington, according to people privy to the matter.