ISLAMABAD: The Asian Development Bank (ADB) has approved contingent disaster financing (CDF) facilities totaling USD 500 million under its policy-based lending to help Pakistan withstand and respond to natural disasters.
The CDF will provide prompt budget support following eligible disaster events to help reduce the economic and fiscal impacts. Project documents noted that the USD 500 million includes: concessional ordinary capital resources lending (USD 250 million) and ordinary capital resources (USD 250 million).
An official statement issued by the Bank noted that floods, earthquakes, and other disasters caused Pakistan an estimated USD 2 billion in annual average losses.
The 2022 floods alone caused USD 14.9 billion in direct damage and USD 15.2 billion in economic losses, pushing as many as 9.1 million people into poverty. Poor and rural communities have less capacity to recover, while women and girls are disproportionately affected.
To help protect communities and reduce the impact of future disasters, the second subprogramme of the Climate and Disaster Resilience Enhancement Programme supports reforms to strengthen disaster preparedness and risk management and integrate resilience measures into Pakistan’s development planning and investment.
The programme also strengthens Pakistan’s disaster risk financing framework and improves the availability of financing following disaster events.
“When disaster strikes, it is often the most vulnerable communities that are hit hardest. Investing in preparedness can help protect lives and livelihoods, reduce economic losses, and safeguard the development gains Pakistan has worked hard to achieve,” said ADB Country Director for Pakistan Emma Fan. “This programme will support the country in implementing critical reforms to ensure a more resilient future.”
The programme is aligned with Pakistan’s priorities for managing disaster risks and with ADB’s commitment to supporting resilience initiatives across Asia and the Pacific.
The programme will support the enhancement of Pakistan’s resilience to disasters triggered by natural hazards and the impacts of climate change. Through an integrated approach, the programme will support (i) strengthened institutional capacity for strategy, planning, and response; (ii) increased investment in disaster risk reduction (DRR) and climate resilience; and (iii) enhanced disaster risk financing (DRF) using a risk-layered approach. The programme is aligned with Pakistans (i) Vision 2025; (ii) Resilient Recovery, Rehabilitation, and Reconstruction Framework (4RF); (iii) updated Nationally Determined Contribution and updated National Climate Change Policy; and (iv) National Adaptation Plan.
The Bank documents noted that the programme will support the implementation of climate change resilience and disaster risk management reforms.
The total programme financing size is USD 1.0 billion, comprising USD 500 million for subprogramme 1 for FY2025, and up to another USD 500 million for a CDF for FY2026. The size of the programme is determined by the government’s development financing needs for FY2025 through FY2030 and expected future costs of climate change and disaster events.
The estimated fiscal deficit was expected to be 7.4 percent of GDP in FY2025 (about USD 28.0 billion) and 5.8 percent of GDP in FY2026 (about USD 23.2 billion). It was expected to gradually decline to 4.6 percent of GDP in the next 4 years to converge with the legislative threshold of 3.5 percent of GDP for promoting fiscal sustainability set out in the Fiscal Responsibility and Debt Limitation (Amendment) Act, 2022, and likely in line with the fiscal anchor target in the International Monetary Fund (IMF) Extended Fund Facility (EFF). Annual average losses from floods and earthquakes are estimated at USD 2.0 billion, of which flood damage comprises about 80 percent, it added.
The government had requested a regular loan of USD 500 million from ADB’s ordinary capital resources to help finance sub programme 1. The loan will have a 15-year term, including a grace period of 3 years; an interest rate determined in accordance with ADB’s Flexible Loan Product; a commitment charge of 0.15 percent per year; and such other terms and conditions outlined in the draft loan agreement. Based on the straight-line method, the average maturity is 9.25 years, and no maturity premium is payable to the ADB.
Copyright Business Recorder, 2026
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