Upbeat $1.5bn ADB loan for Pakistan to be finalised today

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$1.5bn ADB loan for Pakistan to be finalised today

ISLAMABAD: The Asian Development Bank (ADB) is prepared to grant a $1.5 billion programme loan for Pakistan on Friday (today), as part of the programme called Building Resilience with Active Countercyclical Expenditure (BRACE). The Board of the ADB is expected to discuss the sanctioning of a $1.5 billion programme loan for Pakistan at a meeting on Friday (today) in Manila. The loan has been approved, and it is anticipated to be disbursed the next week, assisting Islamabad in replenishing its depleting foreign exchange reserves. In order for the overall disbursement to reach $2 billion during the current month, it is also anticipated that the Asian Infrastructure Investment Bank (AIIB) will approve co-financing of $500 million.

According to the SBP’s official data, which was made public on Thursday, the foreign currency reserves that the State Bank of Pakistan held on October 14, 2022, were $7.5 billion. Less than two months of import coverage would be difficult to achieve with reserves at such a low level.

With a projected current account deficit of $10–$12 billion, Pakistan needs $34 billion to cover its expenses for the current fiscal year, which total $22.9 billion for the payment of its external debt. The severe floods, on the other hand, made the already difficult situation in the economy even worse. Pakistan was predicted to have losses of $32.4 billion and building costs of $16.2 billion by a group of international funders, including the World Bank, ADB, UNDP, and EU.

An official report claims that the $1.5 billion loan from the BRACE programme will assist Pakistan in responding to the deepening macroeconomic crisis brought on by the Russian invasion of Ukraine and the disastrous floods that have displaced close to 33 million people. Before the latest floods, Pakistani officials had already begun to work on this programme loan. Government countercyclical efforts total about $2.4 billion and are intended to lessen the negative effects of cumulative external shocks, particularly on the poor and vulnerable.

With the help of the BRACE programme, the government will get general budget support, which will help to free up the necessary funds for it to respond to crises, offer relief to those in need, reduce its susceptibility, and promote economic resilience to upcoming shocks.

The government has agreed to strong governance measures to ensure sustainability and build capacity, including the creation of a steering committee of stakeholders to oversee the implementation of relief and response measures; a government-led platform for monthly coordinated discussions on policy dialogue with development partners; submission of a quarterly report to ADB; and verification of selected disaster management framework indicator through independent survey.