ADB approves $1b to Pakistan to shore up the public finances - GulfToday

ADB approves $1 billion to Pakistan to strengthen public finances

Pakistan-Property

Laborers work on a building construction site in Karachi, Pakistan. Reuters

The Asian Development Bank (ADB) approved $1 billion in immediate budget support to Pakistan to shore up the country’s public finances and help strengthen economy besides approving $300 million to support energy sector reforms.

The quick dispersing Special Policy-Based Loan is part of a comprehensive multidonor economic reform programme led by the International Monetary Fund (IMF) to stabilise Pakistan’s economy after a deterioration in its fiscal and financial position in mid-2018 caused growth to slump and threatened progress in alleviating poverty, a statement issued by the ADB said. 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 Werner Liepach. “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.” 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 global economic environment and the ongoing poor performance of state-owned enterprises caused public debt to reach unsustainable levels. In July, the IMF approved a three-year $6 billion Extended Fund Facility (EFF) to finance the government’s economic reform programme that aims to put Pakistan’s economy on the path of sustainable and inclusive growth.

The EFF is expected to catalyse 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 programme.

The policy based loan of $300 million approved by the ADB will help the Government of Pakistan to address financial sustainability, governance, and energy infrastructure policy constraints in Pakistan’s energy sector. The financing will support the first of three subprograms totaling $1 billion under the Energy Sector Reforms and Financial Sustainability Program, a key component of a comprehensive multidonor economic reform programme led by the International Monetary Fund that aims to put Pakistan’s economy on the path to sustainable and inclusive growth after a deterioration in its fiscal and financial position in recent years.

News Network International