The Asian Development Bank (ADB) has approved an emergency loan of $1 billion in immediate budget support to Pakistan to shore up the country’s public finances and help strengthen a slowing economy, according to a press release on Friday.
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 stabilize Pakistan’s economy after a major deterioration in its fiscal and financial position in mid-2018 caused growth to slump and threatened progress in alleviating poverty.
ADB approved $1.3 billion budgetary support loan for Pakistan, including $1 billion in crisis response facility
1st time in Pakistan’s history that any govt availed crisis response facility to repay its foreign debt n build forex reserves. https://t.co/rnhkVftHwW
— Dr Humma Saif (@HummaSaif) December 6, 2019
ADB’s 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.
“ADB is committed to providing wide-ranging support to strengthen Pakistan’s economy and reduce the risk of external economic shocks,” said ADB Director General for Central and West Asia Mr. Werner Liepach. “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.”
Pakistan is facing significant economic challenges on the back of a large balance of payments gap and critically low foreign exchange reserves together with weak and unbalanced growth. While the country’s economy has a history of boom and bust economic cycles, it reached a tipping point in 2018 after foreign investment shrank sharply in an uncertain political and global economic environment and the ongoing poor performance of state-owned enterprises caused public debt to reach unsustainable levels.
However, the government has shown policies and figures indicating a gradual improvement which led to the approval of the loan.
an inflow of foreign investments worth $1 billion in the forms of Treasury Bills and Pakistan investment bonds as State Bank set the interest rate at a whopping 13.25%, making Pakistan a fierce global competitor in the securities market
The trade deficit fell by 34 per cent in the first four months of current fiscal year led by a paltry growth in exports and a double digit decline in imports of non-essential products. In the first four months it dipped to $7.77 billion from $11.69bn over the corresponding period last year, reflecting a decline of $4.19bn or 33.52 per cent.
A number of measures have been taken in this regard which helped in reducing the import bill and simultaneously formed a stimulus for sustainable economic growth by improving competitiveness and efficiency of the industry especially export oriented and import substituting units and reducing anomalies and cost of doing business.
Read more: Pakistan’s Economy is Turning Around!
This was followed by an inflow of foreign investments worth $1 billion in the forms of Treasury Bills and Pakistan investment bonds as State Bank set the interest rate at a whopping 13.25%, making Pakistan a fierce global competitor in the securities market.
Earlier this week, Rating agency Moody’s upgraded Pakistan’s outlook from “negative” to “stable”, a significant sign of stabilization vis-à-vis the country’s otherwise ailing economy.