ADB approves $800m loan and guarantee programme for Pakistan

The Asian Development Bank (ADB) has approved an $800 million loan and guarantee programme to support Pakistan’s fiscal management and strengthen public finances. 

The initiative, named the Improved Resource Mobilisation and Utilisation Reform Programme, Subprogramme 2, includes a $300 million policy-based loan and ADB’s first policy-based guarantee of up to $500 million, expected to leverage an additional $1 billion from commercial banks.

The programme builds on reforms introduced under Subprogramme 1 in December 2023, which laid the groundwork for policies and institutional capacity to improve resource mobilisation and allocation. 

Subprogramme 2 focuses on enhancing tax policy, administration, and compliance, improving public expenditure and cash management, promoting digitalisation, and encouraging private sector investment.

ADB stated that the programme is designed to help reduce Pakistan’s fiscal deficit and public debt while creating space for social and development spending. It is supported by technical assistance and collaboration with development partners to strengthen long-term fiscal resilience.

The inclusion of policy-based guarantees aims to mitigate credit risks for commercial banks providing loans to Pakistan, facilitating the mobilisation of private capital within the current fiscal year. 

Despite recent progress, the ADB noted that structural challenges persist, including a narrow tax base that limits fiscal sustainability and the government’s ability to meet social and development needs.