Middle East conflict hurting Pakistan's economic recovery: ADB

SAMARKAND, (Uzbekistan): Asian Development Bank (ADB) President Masato Kanda on Sunday warned that Middle East conflict is undermining Pakistan’s fragile economic recovery fuelling inflation, straining fiscal stability, and deepening poverty—while pledging swift support to help stabilize the economy and sustain critical imports.

Responding to a Business Recorder question during a media briefing in Samarkand, Kanda expressed concern over the country’s vulnerability to external shocks, noting that he had recently visited Pakistan and witnessed flood-devastated areas firsthand.

“I will continue to support Pakistan, as the Middle East conflicts are putting further pressure on its recovery, adding strain to fiscal stability, inflation, and poverty,” he said.

READ MORE: ADB says Pakistan’s economy stabilising but warns of significant downside risks

Kanda noted that at the onset of the Middle East crisis, ADB had projected stronger growth prospects for Pakistan in 2026, but the situation has since become more challenging.

He said the government is taking steps to cushion the economic impact by adjusting energy pricing while safeguarding prudent fiscal and monetary policies to contain inflationary pressures.

“We support the government’s efforts to maintain fiscal discipline through these targeted policy measures,” he added.

The ADB president said the bank is moving swiftly to help Pakistan manage the immediate shock through two key measures: providing rapid support to navigate the crisis and facilitating essential imports through its Trade and Supply Chain Finance Program, while maintaining flexibility in response to evolving conditions.

ADB will back USD70 billion in new energy and digital infrastructure initiatives by 2035, aiming to connect power grids, expand cross-border electricity trade, and improve broadband access across Asia and the Pacific.

“Energy and digital access will define the region’s future,” said ADB President Masato Kanda. “These two initiatives build the systems Asia and the Pacific need to grow, compete, and connect. By linking power grids and digital networks across borders, we can lower costs, expand opportunity, and bring reliable power and digital access to hundreds of millions of people.”

The Pan-Asia Power Grid Initiative will connect national and sub regional power systems so renewable energy can flow across borders, while the Asia-Pacific Digital Highway will help close the digital infrastructure gap and enable the region to benefit from AI-driven growth.

Under the Pan-Asia Power Grid Initiative, ADB will work with governments, utilities, the private sector, and development partners to mobilize $50 billion by 2035 for cross-border power infrastructure that can unlock renewable energy at scale.

The initiative will focus on transmission and grid integration, including cross-border lines, substations, storage, and grid digitalization. It will also support power generation linked to electricity trade, including renewable energy export projects, regional renewable hubs, and hybrid generation-storage facilities.

By 2035, ADB aims to integrate about 20 gigawatts of renewable energy across borders, connect 22,000 circuit-kilometres of transmission lines, improve energy access for 200 million people, create 840,000 jobs, and cut regional power sector emissions by 15 percent.

ADB expects to finance about half of the $50 billion initiative from its own resources and raise the rest through co financing, including from the private sector. Up to USD10 million in technical assistance will support efforts to align regulations, adopt common technical standards, prepare feasibility studies and advance other work needed for major projects.

The Pan-Asia Power Grid Initiative marks a shift from country-to-country energy links to a regional approach to power trade. It builds on existing subregional cooperation initiatives, including the South Asia Subregional Economic Cooperation program, the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation grid interconnection planning, the ASEAN Power Grid, and the Central Asia Regional Economic Cooperation Energy Strategy 2030. The Asia-Pacific Digital Highway will mobilize $20 billion by 2035 to finance digital corridors, data infrastructure, and AI-ready economies.

Investments will focus on connected infrastructure, including terrestrial and subsea fibre networks, satellite links and regional data centres. ADB will also provide policy and regulatory support, including on cyber security risk management, and invest in skills programs to strengthen digital and AI readiness.

By 2035, the initiative aims to provide first-time broadband access to 200 million people and faster, more reliable digital connectivity for another 450 million people across the region. It is expected to cut connectivity costs in remote and landlocked areas by about 40 percent and help create 4 million jobs.

ADB expects to finance USD15 billion of the USD20 billion initiative from its own resources and raise USD5 billion through co financing, including from the private sector. The Centre for AI Innovation and Development will be established in Seoul to support the initiative. Backed by a USD20 million contribution from the Government of the Republic of Korea, the centre will promote responsible and inclusive AI adoption and help train about 3 million people in digital and AI-related skills by 2035.

Copyright Business Recorder, 2026