The Asian Development Bank (ADB) recently approved $1 bn in immediate budget support to Pakistan to shore up the country’s public finances and help strengthen a slowing economy. The quick dispersing special policy-based loan is part of a comprehensive multi-donor economic reform program led by the International Monetary Fund (IMF) to stabilise Pakistan’s economy.
The country’s fiscal and financial position deteriorated in mid-2018 resulting in a growth slump and affecting poverty alleviation programmes. ADB’s financing was approved after the Pakistan 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, according to an ADB report.
“These funds will meet the government’s emergency financing needs to prevent significant adverse social and economic impacts and lay the foundations for a return to balanced growth,” said ADB Director General for Central and West Asia Werner Liepach. Pakistan is facing significant economic challenges due to a large balance of payments gap and critically low foreign exchange reserves together with weak and unbalanced growth.
In July, the IMF approved a three-year $6 bn extended fund facility (EFF) to finance the government’s economic reform program that aims to put Pakistan’s economy on the path of sustainable and inclusive growth. The EFF is expected to catalyze at least $38 bn in financing from Pakistan’s development partners. ADB has committed to provide a total of $2.1 bn in policy-based lending during fiscal 2019–2020 to support the reform programme.