Asian Bank approves $1 billion to support Pakistan’s economy

Asian Bank approves $1 billion to support Pakistan’s economy

MANILA, PHILIPPINES: The Asian Development Bank (ADB) on Friday approved $1 billion in immediate budget support to Pakistan to shore up the country’s public finances and help strengthen a slowing economy, a statement said.

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 financing was approved by the Asian Bank 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 lower income group 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 Asian Bank 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,” Asian Bank Director added.

The Asian Bank said that Pakistan was 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.

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.

The Asian Bank has committed to provide a total of $2.1 billion in policy-based lending during fiscal year 2019–2020 to support the reform program.

It further stated that the Asian Bank 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. Established in 1966, it is owned by 68 members—49 from the region.