Contingent financing will provide quick budget support following eligible disasters, including floods and earthquakes, as Pakistan faces average annual disaster losses of $2 billion.

The Asian Development Bank (ADB) on Wednesday approved a $500 million contingent disaster financing facility for Pakistan to strengthen its ability to withstand and respond to natural disasters.

According to an ADB statement, the financing was approved under its policy-based lending framework to reduce the economic and fiscal impact of disasters, including floods and earthquakes, and provide prompt budget support following eligible disaster events.

The bank estimated that floods, earthquakes and other disasters cause Pakistan average annual losses of around $2 billion.

The 2022 floods alone resulted in $14.9 billion in direct damage and $15.2 billion in economic losses, pushing as many as 9.1 million people into poverty, the ADB said.

The financing forms part of the second subprogramme of the Climate and Disaster Resilience Enhancement Programme, which supports reforms to improve disaster preparedness, risk management and climate resilience in development planning and investment.

ADB Country Director for Pakistan Emma Fan said vulnerable communities were often the hardest hit when disasters struck.

She added that investment in preparedness could protect lives and livelihoods, reduce economic losses and safeguard Pakistan’s development gains.

The programme will also strengthen Pakistan’s disaster risk financing framework and improve access to funds following emergencies.

Pakistan has faced challenges in securing financing for long-term flood protection. The Fourth National Flood Protection Plan was delayed in August after the government failed to secure the required funding.

The ADB had previously approved a $500 million policy-based loan in October 2024 under the same resilience programme. In April, Pakistan also sought another $1 billion in financing under its second tranche.