Islamabad: Cash-strapped Pakistan received a USD 1.3-billion loan from the Asian Development Bank (ADB) on Friday to support the country's public finances and shore up the slowing economy. The ADB loan comes just days after financial service company Moody's changed Pakistan's outlook from negative to stable.
Pakistan is facing a serious economic crisis with short supplies of foreign currency reserves and stagnating growth in recent years.
Since assuming power in August 2018, Prime Minister Imran Khan has been appealing to close allies like China and Saudi Arabia to provide concessional loans to reduce the size of the bailout package that Pakistan may need from the International Monetary Fund (IMF).
The ADB's quick dispersing special policy-based loan is part of a multi-donor economic reform programme led by the IMF to stabilise Pakistan's economy after a major deterioration in its fiscal position in 2018, according to a statement by the Manila-based regional lender.
The ADB said financing was approved after the Pakistan government implemented a series of IMF-supported reforms and actions to improve its current account deficit, strengthen its revenue base, and protect the poor against the social impact of the economic crisis.
"ADB is committed to providing wide-ranging support to strengthen Pakistan's economy and reduce the risk of external economic shocks," said ADB Director General for Central and West Asia Werner Liepach. "These funds will meet the government's emergency financing needs to prevent significant adverse social and economic impacts and lay the foundations for a return to balanced growth," Liepach.
While USD 1 billion has been extended to Pakistan to improve its current account deficit, strengthen its revenue base, USD 300 million has been extended for the energy programme, another ADB press release said.
The energy financing will support the first of three sub-programmes totalling USD 1 billion under Pakistan's Energy Sector Reforms and Financial Sustainability Programme, the bank said.
Pakistan has made significant effort in recent years to expand its electricity generation capacity, but challenges of inefficiency, distortions, and uneven reforms in the sector are yet to be overcome, the ADB said.
These inefficiencies were estimated to have cost the country's economy upto USD 18 billion, or 6.5 per cent of gross domestic product in 2015.
Apart from the ADB loan, the current Pakistan government has borrowed USD 10.40 billion from friendly countries like China and the UAE to stabilise the foreign exchange reserves and repayment of old loans, a media report said on Tuesday.