Islamabad: The Asian Development Bank (ADB) has approved a $500 million loan for budgetary support to Pakistan, restoring policy-based lending after keeping it suspended for over two years due to deterioration in macroeconomic conditions, the media reported on Thursday.
The ADB board of directors on Wednesday approved the loan under the $800-million Trade and Competitiveness Support Programme, reports The Express Tribune.
The agreement was inked by Economic Affairs Division Secretary Noor Ahmed and ADB Country Director Xiaohong Yang. Minister for Economic Affairs Hammad Azhar witnessed the loan signing.
The government expects to receive the payment by the weekend, which will provide cushion to the foreign exchange reserves held by the State Bank of Pakistan.
The loan approval was pegged with introduction of a new legislation and approval of e-commerce policy by the federal cabinet. The ADB and the World Bank had suspended budgetary support for Pakistan in 2017 after its macroeconomic conditions started deteriorating.
Although the macroeconomic conditions still remain fragile, the international lenders have decided to restore budgetary support in the wake of the three-year Extended Fund Facility of the International Monetary Fund (IMF), The Express Tribune reported.
The IMF has projected $4.3 billion in budgetary support from the World Bank and the ADB from 2019-20 to 2021-22.
Out of the $4.3 billion, the IMF has shown $2.3 billion in budgetary assistance from the ADB, which is 54 per cent of the projected support. The IMF has projected inflow of $800 million from the ADB in the current fiscal year, although Islamabad is seeking at least $2.1 billion from the bank.
Pakistan is heavily dependent on international creditors for current account deficit financing, repayment of maturing debt and building foreign currency reserves. It will need at least $25.6 billion in the current fiscal year to meet these three obligations.