ISLAMABAD, June 21: The Asian Development Bank (ADB) has proposed a three year (2005-07) $2.6 billion funding programme for Pakistan to help improve the country's aging infrastructure and increase financial support for the neglected social sectors.

Sources in the local multilateral agencies told Dawn here on Monday that a high level ADB mission is arriving here on July 1 for a two week visit to discuss the next three year's Bank's funding programme.

The mission would meet the senior federal government officials and the higher authorities of all the four provinces to finalize bank's assistance for various infrastructure projects including mega city projects in major cities.

The sources said that the ADB has tentatively planned to support mega infrastructure projects for improving power & water sectors and help undertake mega city projects.

The purpose of taking up the mega city projects is to rehabilitate roads & buildings, improve water supply, reduce air pollution and improve sewerage & sanitation programme. In this behalf, an action plan was expected to be jointly worked out by the government and the ADB.

However, the sources said the bank wanted the government to improve the weak implementation process due to which development projects often got delayed and in the process people tried to indulge in corrupt practices.

Although the government has announced Rs202 billion Public Sector Development Programme (PSDP) for 2004-05, the ADB believed that more funds could be allocated for social sector.

The bank believed that in an environment where the main focus of macroeconomic stablization programme - the key to reviving growth - had been towards controlling the fiscal deficit, generating resources for poverty reduction, which was a difficult task.

Therefore, the strategy should envisage an increase in allocations over the medium term as more and more fiscal space becomes available as a result of reduction in overall cost of borrowing, decreasing debt servicing, increased resource mobilization and reduction in public sector enterprises' losses, while containing the overall fiscal deficit within the range of 4-3.5 per cent.

The bank, the sources said, was of the view that the government also needed to attract necessary investment to achieve the objectives of higher GDP growth. According to the PRSP, overall investment fell from 20 per cent of the GDP in 1992-03 to an all time low of 14 per cent in 2000-01, which contributed to slowdown in industrial growth.

Public investment in this period nearly halved and private investment fell by one-fourth. This shrank employment opportunities particularly for the new entrants into the labour force. The last three year have seen a recovery in investment, which if sustained have a positive impact on employment.