ADB to lend Pakistan $3.4b for budgetary support: Shaikh

ISLAMABAD: Out of total $3.4 billion commitment of the ADB through restoration of budgetary support for Islamabad after approval of IMF package, Pakistan will become the first country to avail $1 billion Special Policy Based Lending (SPBL) from Manila based lender within the first quarter of next fiscal year.

This programme loan of SPBL will start repayment period after eight years so it will help Islamabad to overcome its arising difficulties on account of maturity of short term loans on external front.

The ADB has shown its willingness to restore budgetary support for Pakistan which remained suspended almost two years back because of macroeconomic instability and rapidly depleting foreign currency reserves.

Now with possibility of approval of 39 months Extended Fund Facility (EFF) for $6 billion package from the IMF in first week of July 2019, the ADB is ready to provide $2.2 billion to Pakistan for four major policy reforms for different sectors of the economy in the next fiscal year.

Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh on Saturday stated that ADB would give $3.4 billion in budgetary support.

“I had a meeting with Werner Liepach, DG ADB today to agree on the ADB programme. The ADB will provide $3.4 billion in budgetary support to help with reforms and stabilization of the economy. There will be $2.2 billion released this fiscal year, starting in the first quarter of FY 2019-20. This will help the reserve position and the external account”, Dr Hafeez Shaikh stated in his tweets on Saturday evening.

However, the official sources confirmed to The News on Saturday that the ADB agreed to provide around $2.2 billion to Pakistan in the coming financial year 2019-20 in the aftermath of possibility of approval of the IMF programme by its executive board in first week of July 2019. “The ADB has agreed to provide $500 million programme for trade and competitiveness support and ADB’s Board is expected to grant its approval in first week of August 2019”, said top official of Finance Division.

The official said that ADB had conceived SPBL lending facility in the aftermath of financial crisis in 2008 but none of the country had availed this financing instrument. Now Islamabad approached the ADB for obtaining $1 billion SPBL for maximum maturity period of eight years. Its repayment would start after pause of eight years so it would be breathing space in order to overcome difficulties arising out of short term commercial borrowings.

This SPBL will be approved by August/September period of 2019. Its rate may be little bit higher than normal concessional rates of ADB but it will be much cheaper than the offered rates of any paper going to launch by the government in international capital market to generate desired dollar inflows.

Another programme in the pipeline is about energy sector programme loan as the ADB may provide $300 to $400 million to Pakistan for undertaking crucial energy sector reforms.

For Capital Market Programme, the ADB and Pakistani side are discussing programme loan of around $400 million to $500 million for the next fiscal year 2019-20.

According to statement issued by the Ministry of Finance stating that Director General Asian Development Bank (ADB) Werner Leipach and Country Director ADB Ms Xiaohong Yang called on Adviser to the Prime Minister on Finance, Revenue and Economic Affairs, Dr Abdul Hafeez Shaikh, here Saturday and discussed matters relating to ADB’s upcoming operations in Pakistan. The Director General briefed the Adviser that in addition to strong project portfolio, the Bank is also keen to provide balance of payment financing to support government of Pakistan’s structural reform agenda. This budgetary support is estimated to be about dollars 2 billion in the fiscal year 2020 and will broadly cover such policy reform areas as trade competitiveness, energy sector and capital markets development.

The Adviser thanked the visiting Director General for strong support and reiterated government’s commitment to undertake the much-needed reforms to achieve stability and economic turnaround.