Virendra Pandit
New Delhi: A nearly bankrupt and failing state, Pakistan, woke up on Tuesday to a piece of news it didn’t know if it was good or bad for national honor: the Manila-based Asian Development Bank (ADB) has assured Islamabad that it would get USD 2 billion per annum, as fresh loans, every year, from 2024 to 2027.
The four-year package amounts to USD 8 billion.
The ADB) has assured Pakistan of providing USD 2 billion annually in new loans, as Islamabad seeks half of the amount on concessional terms amid the government’s inability to get cheaper credit due to its worsened ratings, the media reported.
Visiting ADB President Masatsugu Asakawa gave the fresh loan assurance during his interaction with Pakistani officials, the Ministry of Economic Affairs said.
Out of the USD 2 billion, the ADB will give around USD 1 billion at a fixed 2 percent interest rate under its concessional window, officials added.
In recent years, Pakistan has become a desperate borrower and is striking deals at unsustainably higher interest rates – ranging from 7 percent to as high as 11 percent. The finance ministry struck a USD 600 million deal with a bank this month at the highest-ever rate of 11 percent in dollar terms.
The bank did not reduce the interest rates despite Pakistan and the International Monetary Fund (IMF) having reached a staff-level agreement, indicating the lender’s skepticism about Islamabad’s creditworthiness.
The three top international credit rating agencies have placed Pakistan below the investment grade, which is now a major hurdle in tapping the foreign capital markets.
The ADB’s concessional financing is cheaper than the IMF lending. The ministry said last month that the interest rate of the IMF’s Extended Fund Facility program was around 5 percent.
In a press statement, it stated that Asakawa assured Pakistan of the ADB’s continued support in the areas of public-private partnership, climate, and disaster resilience enhancement, domestic resource mobilization, promoting women-inclusive finance and energy sector reforms.
He also laid the foundation of the ADB’s new resident mission building in Islamabad, in recognition of its association with Pakistan, which joined the Bank as a founding member in 1966.
Asakawa also met with Economic Affairs Minister Ahad Cheema to discuss the country’s development priorities and macroeconomic reforms and reaffirmed ADB’s continued support to Pakistan for complementing its development and reform agenda.
Cheema briefed the ADB chief on a series of reforms introduced by the government, including enhancing tax revenues, improving the financial sustainability of the energy sector, reducing untargeted subsidies, and scaling up social protection, according to the ministry.
The ADB president reposed his trust in Pakistan’s reform agenda and appreciated the required tough stabilization measures taken by the government to bring about macroeconomic stability in the country, it added.
The lender has appointed a new country director to Pakistan, Emma Fan – a Chinese-born New Zealander. She will replace the incumbent country director next month.
The IMF has also appointed a new country head, Mahir Bicini, a Turkish national, who will take over in December.
Asakawa underscored the ADB’s continued support of Pakistan’s climate resilience and sustainable development in coordination with other development agencies, non-government organizations, and the private sector.
“The groundbreaking of our new resident mission coincides with the beginning of consultation for ADB’s new Pakistan Country Partnership Strategy for 2026 to 2030,” he said.
“The new strategy will identify key challenges and development requirements, support the government in implementing key structural reforms, and boost economic and climate resilience,” he added.
“The future assistance is expected to focus on mitigating the impacts of climate change, investing in the social sector, and developing climate-smart economic infrastructure. The ADB will also explore the use of digital technology to boost inclusive growth, expand opportunities, and improve government services.”
He said the lender will support Pakistan’s prosperity and regional economic integration, especially with its Central Asian neighbors. An important area of focus would be the unlocking of regional linkages through the Central Asia Regional Economic Cooperation (CAREC) program to open new trade and investment opportunities.
Prime Minister Shehbaz Sharif said that he is personally overseeing the progress of the reforms to ensure their successful implementation and long-term impact, underscoring the government’s commitment to sustainable economic growth and stability.
They also witnessed the loan signing of the Sindh Emergency Housing Reconstruction Project amounting to USD 400 million and the Khyber-Pakhtunkhwa Rural Roads Development Project worth USD 320 million. Both these projects are part of the ADB’s flood-related commitments.