ADB approves $10bln five-year loan programme for Pakistan

ISLAMABAD: The Asian Development Bank (ADB) on Wednesday announced a new five-year loan program, estimated at approximately $10 billion, for Pakistan to help in expanding economic opportunities in the country.

The Manila-based lender said it endorsed a new 5-year country partnership strategy (CPS) to help restore economic stability and growth in Pakistan, enhance people’s wellbeing, create jobs, and expand economic opportunities as the country works to overcome the coronavirus disease (COVID-19) pandemic.

The announcement came a day after the World Bank’s assurance about support to Pakistan’s priority development objectives under an estimated $12 billion loan program starting from the next fiscal year. The framework is nearing the completion stage and expected to have the final approval by May or June.

The ADB didn’t mention size of the new loan it was estimated at approximately $10 billion before the coronavirus wave. The new program, which was previously propounded for 2020-24, was on hold during the last year of uncertainty amid the global economic slump.

Sources confirmed with The News the ADB has committed $1.48 billion in loan per annum for corona vaccine and other purposes, and total lending would cross $10 billion mark over the five-year period. ADB said the pandemic has interrupted the macroeconomic recovery in Pakistan, resulting in a sharp contraction in growth, a rise in public expenditures, and a loosening of monetary policy to mitigate the health and economic impacts.

ADB’s assistance over the next 5 years prioritises support for improving economic management, building resilience through human capital development and social protection, and boosting competitiveness and private sector development. The restoration of ADB and World Bank loan programs vividly indicates that Pakistan is in good terms with the International Monetary Fund (IMF), which is expected to soon restore its suspended extended fund facility of $6 billion.

“The government has expressed its strong commitment to the ongoing International Monetary Fund extended fund facility program,” ADB Country Director for Pakistan Xiaohong Yang was quoted in a statement as saying. “The CPS places a strong focus on combining reforms with physical and social investments to improve sustainability and generate lasting development impact.”

The growing foreign loans can only be termed fruitful when they are funneled toward the productive avenues and lead to benefits for the masses, said an unnamed analyst. Historically, the foreign funds have been misspent in non-development expenditures and subsequently the financial support ended up in burdening the external account sector, according to analysts.

The economy steadily recovering from the debilitating effects of coronavirus lockdown is already under an immense pressure of foreign debts. The country owed around $77.9 billion of foreign debt and liabilities till June 2020, showing a six percent growth over $73.6 billion a year ago, according to an official estimate.

According to reports, the present government borrowed more than $10 billion from multilateral financial institutions during the last fiscal year of 2019/20.

“Undoubtedly, loans are vital to the modern economic system. The U.S. which is the world’s biggest military as well as economic power is also the top indebted economy,” said the analyst. “Pakistan has no other option but to take loans, the real problem is in the way they are used.” "The loans should be utilised to shepherd the economy on the sustainable and inclusive growth path," added the analyst.

ADB said it will support macroeconomic stabilisation in Pakistan and maintain support for reforms to improve the country’s trade prospects and external positions. ADB will continue to help improve the energy sector through reforms and sovereign and non-sovereign investments. It will continue deepening and diversifying Pakistan’s financial markets to promote investment, growth, and private sector development.

Under the CPS, ADB will expand investments and help accelerate reforms in secondary education and technical and vocational education and training. ADB will address the challenge of out-of-school children and target children from poor and vulnerable households.

ADB will continue to promote women’s economic empowerment and enhance women’s resilience to external shocks and boost the country’s resilience to climate change and strengthen adaptation and disaster risk management.