Pakistan eligible for $2.5 billion loan from Asian Development Bank
The Asian Development Bank (AfDB) has announced that it will provide Pakistan with an additional $2.5 billion in loans, including $1.5 billion by the end of the year, to help the cash-strapped country. liquidity, which is in desperate need of foreign assistance due to depleted foreign exchange reserves and increased repayments and import financing needs. According to The Express Tribune newspaper on Friday, the Ministry of Finance said on Thursday after a meeting between Minister of State for Finance and Revenue Aisha Ghous Pasha and AfDB Country Director Yong Ye.
However, it will be difficult to get the $1.5 billion facility on a priority basis due to demands and slow bureaucracy in the Ministry of Economic Affairs which has so far not even written a letter. official to the AfDB to avail the loan, he said. The Secretary of the Economic Affairs Division (EAD) has been unable to focus on foreign loan disbursements which are now behind the third and fourth quarter targets, he said.
“The AfDB has indicated additional support of $2.5 billion for the next fiscal year, of which $1.5-2 billion may be available in the current calendar year,” according to the finance ministry. Finance Ministry sources said that the AfDB has indicated that it could provide $1.5 billion under the counter-cyclical financing facility and about another $400 million under the sector policy loans. energy, according to the report.
The $2.5 billion in additional funding shown would be on top of the regular $2 billion annual envelopes in the form of strategic and project loans. Cash-strapped Pakistan is currently in dire need of foreign loans due to depleted foreign exchange reserves, coupled with increased repayments and import financing needs.
The AfDB board already approved the countercyclical financing facility on May 3 and Pakistan’s share includes a mix of concessional and commercial facilities, according to the report. However, approval of the $1.5 billion loan by the AfDB’s Board of Directors will require that Pakistan’s debt burden be bearable and that it does not follow reckless fiscal policies – the two requirements that will require intense efforts to be met, he said.
The rupee-dollar parity slipped to an all-time low of 191.77 rupees to the dollar on Thursday amid market uncertainty over the fate of the IMF program, the report said. To obtain the additional financing from the AfDB, Pakistan must meet many conditions to qualify for the facility which was designed to help member countries cope with the challenges posed by the COVID-19 pandemic, he said. noted.
Sources said the negative impact of the Russian-Ukrainian war on the Pakistani economy will also be a factor in the loan approval decision. The government will also demand to submit a sound macroeconomic plan to the AfDB board, which means a waiver of existing expansionary fiscal policies and the withdrawal of fuel subsidies. The government will also have to obtain an assessment letter from the IMF, which should validate that the country’s economic policies were on the right track.
However, it will not be easy to get an assessment letter from the IMF until Islamabad settles outstanding issues such as the withdrawal of fuel subsidies and the tax amnesty program. Pakistan and the IMF are due to hold political-level talks for reviving the IMF program in Doha on May 18. Due to the deterioration of the situation in the external sector and the resulting reduction in foreign exchange reserves, China has delayed the processing of 2.3 USD. billions of dollars in commercial loans and placed a condition that Islamabad cannot use the money effectively.
Summary of news:
- Pakistan eligible for $2.5 billion loan from Asian Development Bank
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