- Loan will be utilised to fund government’s $2.3 billion countercyclical development expenditure programme
The Asian Development Bank (ADB) has approved $1.5 billion in financing to help the Pakistan government provide social protection, promote food security, and support employment for its people amid devastating floods and global supply chain disruptions, it was announced by the Manila-based lender on Friday.
As per the statement, the loan, provided under ADB’s Building Resilience with Active Countercyclical Expenditures (BRACE), will be utilised to fund the government’s $2.3 billion countercyclical development expenditure programme designed to cushion the impacts of external shocks, including the Russian invasion of Ukraine.
The $1.5-billion countercyclical support is part of ADB's response package to support people, livelihoods, and infrastructure in Pakistan in the wake of the recent floods which have affected over 33 million people and caused extensive damage to infrastructure and agriculture, it said.
“Pakistan’s recovery from the COVID-19 pandemic has been impeded by external shocks,” said ADB Director General for Central and West Asia Yevgeniy Zhukov.
“Increasing business costs and rising living expenses are affecting millions of Pakistanis, especially the poor and vulnerable. ADB’s program will help the government manage the impacts of high prices, increasing food insecurity, slowing business activity, and reducing income for vulnerable groups, many of whom are also reeling from the devastating floods.”
The financing from the international lender will provide much-needed fiscal space for the government to implement its countercyclical development expenditure package, designed to target the poorest families in Pakistan.
The government’s support includes specific measures to promote gender empowerment and climate change adaptation, which have become even more important in light of the recent floods.
The ADB said that its assistance will help to expand the number of families receiving cash transfers from 7.9 million to 9 million, increase the number of children enrolled in primary and secondary schools, and enhance geographic coverage of health services and nutritional supplies for pregnant and lactating mothers and children under 2 years old.
“The program is part of a comprehensive and well-coordinated package of support. It will help the government deal with the impact of the immediate shocks to the economy, while, in parallel, continue the structural reforms that are necessary to improve the country’s medium- to long-term macroeconomic prospects,” ADB Director for Public Management, Financial Sector, and Trade Tariq Niazi was quoted as saying in the statement.
“We are working closely with the International Monetary Fund (IMF) and other development partners to ensure that our support through policy dialogue, technical assistance, and program lending is well-coordinated and that, ultimately, we are able to help the government improve Pakistan's resilience to shocks.”
Later, Finance Minister Ishaq Dar said the financing will be released next week.
“AlhamdoLilah! Asian Development Bank’s Board has approved today BRACE facility of $1.5 billion for Pakistan,” said Dar on Twitter.
“Agreement signing and release of funds in the week beginning Monday 24th Oct 2022,” he added.
The development comes as a major boost for cash-strapped Pakistan that has seen its foreign exchange reserves dwindle in recent months.
Foreign exchange reserves held by the State Bank of Pakistan (SBP) are currently at an alarmingly low level of $7.6 billion as of October 14, 2022, according to data released on Thursday, barely enough to cover two months of imports.
Net foreign reserves held by commercial banks amounted to $5.65 billion, taking the country's total reserves' position to $13.25 billion.
The low level of reserves has caused the rupee to see wild swings in recent months.