ADB Approves $1 billion in emergency budget support to Pakistan

KARACHI: The Asian Development Bank (ADB) has approved $1 billion loan in immediate budget support to Pakistan to shore up the country’s public finances and help strengthen a slowing economy, the ADB announced on Friday.
The quick dispersing Special Policy-Based Loan is part of a comprehensive multi-donor economic reform program led by the International Monetary Fund (IMF) to stabilize Pakistan’s economy after a major deterioration in its fiscal and financial position in mid-2018 caused growth to slump and threatened progress in alleviating poverty.
The Asian lender, in June this year, had announced to extend a loan of $3.4 billion to Pakistan for budgetary support to help with reforms and stabilization of the economy, Adviser to the Prime Minister on Finance Dr. Abdul Hafeez Shaikh had informed in mid of June 2019.
Pakistan was expecting $2.2 billion to be released this fiscal year FY 2019-20 to build up the country’s reserve position and the external account.
ADB’s financing was approved after the government implemented a series of IMF-supported reforms and actions to improve its current account deficit, strengthen its revenue base, and protect the poor against the social impact of the economic crisis.
“ADB is committed to providing wide-ranging support to strengthen Pakistan’s economy and reduce the risk of external economic shocks,” said ADB Director General for Central and West Asia Mr. Werner Liepach, in a statement issued from Manila, Philippines. “These funds will meet the government’s emergency financing needs to prevent significant adverse social and economic impacts and lay the foundations for a return to balanced growth.”
Pakistan is facing significant economic challenges on the back of a large balance of payments gap and critically low foreign exchange reserves together with weak and unbalanced growth. While the country’s economy has a history of boom and bust economic cycles, it reached a tipping point in 2018 after foreign investment shrank sharply in an uncertain political and global economic environment and the ongoing poor performance of state-owned enterprises caused public debt to reach unsustainable levels, the statement added.
In July, the IMF approved a three-year $6 billion Extended Fund Facility (EFF) to finance the government’s economic reform program that aims to put Pakistan’s economy on the path of sustainable and inclusive growth. The EFF is expected to catalyze at least $38 billion in financing from Pakistan’s development partners.
ADB has committed to provide a total of $2.1 billion in policy-based lending during fiscal year 2019–2020 to support the reform program, according to the statement.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion.