AfDB hints it will provide $2.5bn loan to cash-strapped Pakistan

AfDB hints at providing $2.5bn loan to cash-strapped Pakistan

Asian development Bank (ADB) said it will provide $2.5 billion in additional loans to Pakistan, including $1.5 billion before the end of this year, to help the cash-strapped country which urgently needs foreign aid due to the depletion of its foreign exchange reserves. and increased repayments and import financing needs.

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, The Express Tribune newspaper reported on Friday.

The AfDB has indicated additional support of $2.5 billion for the next fiscal year, of which $1.5 billion to $2 billion may be available in the current calendar year, according to the Ministry of Finance.

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.

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 $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 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.

In order to secure the additional financing from the AfDB, Pakistan needs to fulfill many conditions to qualify for the facility which was designed to help member countries cope with the challenges posed by the COVID-19 pandemic, it said. -he indicates.

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The AfDB board has already approved the countercyclical financing facility on May 3 and Pakistan’s share includes a mix of concessional and commercial facility, according to the report.

However, approval of the $1.5 billion loan by the AfDB Board of Directors will require that Pakistan’s debt burden be bearable and that it does not follow reckless fiscal policies, both requirements that will require intense efforts to be met, he said.

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.

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Pakistan and the IMF are due to hold political-level talks for reviving the IMF program in Doha on May 18.

Due to the deteriorating external sector situation and the resulting reduction in foreign exchange reserves, China delayed the processing of $2.3 billion in commercial loans and made it a condition that Islamabad could not not use the money effectively.