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”.
According to a press release issued by ADB, the quick dispersing loan is part of a comprehensive multi-donor economic reform programme 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.
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.”
$300M FOR ENERGY SECTOR
In another statement issued on Friday, the ADB approved a $300 million policy-based loan to aid the government in ensuring financial stability, governance and tackling hurdles in the policy infrastructure in Pakistan’s energy sector.
The financing will support the first of three subprogrammes totalling $1 billion under the Energy Sector Reforms and Financial Sustainability Programme, a key component of a comprehensive multi-donor economic reform program led by the IMF 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.
“The cash shortfall across the power supply chain in Pakistan, also known as circular debt, has shot up to more than $10 billion and is a longstanding chronic issue ailing the country’s power sector,” said ADB Director General for Central and West Asia Mr. Werner Liepach. “A comprehensive and realistic Circular Debt Reduction Plan, assisted by ADB in close coordination with other development partners, is the cornerstone of this subprogram. The plan aims to drastically cut the new flows of circular debt and provides policy directions on addressing accumulated circular debt.”