ADB, Pakistan sign $1.2bn loan agreement

ISLAMABAD: The Asian Development Bank signed a $1.2 billion loan agreement with Pakistan, ADB officials confirmed on Wednesday.

The agreement, which was signed last Friday (December 15), comprises funding for budget financing and projects focused on domestic resource mobilisation, while a total of six projects will work towards making women financially independent.

At least one-third of the funds will be disbursed as budget financing and make way for jammed financing pipelines following a deal with the International Monetary Fund (IMF).

The Economic Affairs Division (EAD) and ADB signed the loan agreements last Friday. An EAD official also confirmed the agreement and highlighted that ADB will allocate $400 million from the total fund for budget support through two different agreements.

Meanwhile, the executive directors board of the World Bank also approved $350 million in financing on Wednesday for the Second Resilient Institutions for Sustainable Economy (RISE-II) Operation to strengthen fiscal management and promote competitiveness for sustained and inclusive economic growth. Najy Benhassine, the World Bank country director for Pakistan, said Pakistan needs urgent fiscal and structural reforms to restore macroeconomic balance and lay the foundations for sustainable growth. “RISE-II completes a first phase of tax, energy and business climate reforms geared to raising additional revenues, improve the targeting of expenditures and stimulate competition and investment,” he added. The operation contributes to better fiscal management by improving fiscal policy coordination, enhancing debt transparency and management, strengthening taxation of property, and improving financial viability of the power sector. The World Bank operation also aims to foster growth and competitiveness by reducing the cost of tax compliance, improving financial sector transparency, encouraging the use of digital payments and promoting exports by lowering import tariffs. “Based on the foundations laid through RISE II and parallel support by other IFIs, Pakistan has the opportunity to tackle long-standing structural distortions in its economy after the upcoming general elections. Failing to use this opportunity would risk plunging the country back into stop-and-go economic cycles,” said Derek HC Chen, task team leader of the operation.