Country receives $1.3 billion loan from ADB

Pakistan has received some $ 1.3 billion from Asian Development Bank (ADB) as loan to strengthen the economy. A Special Policy-Based loan was approved by ADB on December 6, 2019 for Pakistan for budgetary support and economic reforms. Accordingly, on December 9, Pakistan signed an agreement with ADB for disbursement of $1.3 billion. The agreement was signed by Syed Pervaiz Abbas, Secretary Economic Affairs Division and Xiahong Yang Country Director ADB in Islamabad on Monday morning.

After the formal agreement, ADB on Monday released the pledged amount to build the Pakistan's foreign exchange reserves. SBP spokesman has confirmed that an amount of $1.3 billion was received from ADB into State Bank of Pakistan's (SBP) account between Monday and Tuesday night.

Sources said that with arrival of these inflows, foreign exchange reserves held by the SBP will cross $10 billion mark after a gap of 10-months. Previously, in April 2019 SBP's foreign exchange reserves were $10.2 billion and since then it's were on decline due to higher current account deficit and massive external debt servicing.

ADB is committed to provide a total of $2.1 billion in policy-based lending during fiscal year 2019-20 to support Pakistan's economic reform program.

According to ADB, the 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.

For the last two years, Pakistan is facing economic challenges due to large balance of payments gap and critically low foreign exchange reserves. In order to build the depleting foreign exchange reserves, on the request of the government of Pakistan, friendly countries including Saudi Arabia, China, UAE and Qatar have placed cumulatively some $7.5 billion with Pakistan.

In addition, Pakistan also approached IMF for a bailout package and it approved 36-months worth $6 billion Extended Fund Facility (EFF) program for Pakistan to finance the government's economic reform program. The first tranche of EFF amounted to $991.4 million was received in July. Pakistan is also planning to launch Panda bonds in Chinese market to generate some one billion dollar. The bonds are expected to launch in January next year.