ADB Approves $800 Million Program for Pakistan’s Fiscal Sustainability

The Asian Development Bank (ADB) has sanctioned an $800 million initiative aimed at reinforcing fiscal stability and enhancing public financial management within Pakistan. This decision was announced on Tuesday.

The ‘Improved Resource Mobilization and Utilization Reform Program, Subprogram 2’ encompasses a policy-based loan amounting to $300 million, alongside ADB’s inaugural policy-based guarantee, capped at $500 million. This guarantee is projected to stimulate approximately $1 billion in funding from various commercial banking institutions, according to an official statement from ADB.

“Pakistan has demonstrated notable advancements in its macroeconomic environment,” remarked Emma Fan, ADB Country Director for Pakistan. “This program is designed to bolster the government’s ongoing dedication to policy and institutional changes, which are essential for strengthening public finances and encouraging sustained economic expansion.”

The multilateral financial institution emphasized that the program is geared towards facilitating comprehensive reforms aimed at refining tax policies, streamlining administration, and improving compliance. Moreover, it seeks to optimize public expenditure and cash flow management, while also fostering digitalization, investment promotion, and private sector development.

“These interventions are strategically designed to narrow Pakistan’s fiscal deficit and overall public debt, concurrently freeing up resources for vital social and developmental expenditures. The program is supported by an extensive package that incorporates technical assistance and close collaboration with development partners. This will aid Pakistan in cultivating enduring fiscal robustness and stability,” the Manila-based lender articulated.

Earlier this year, in April, the ADB adjusted its GDP growth projection for Pakistan downwards to 2.5% for the fiscal year 2025, while noting that the nation’s economic prospects are heavily contingent on the successful implementation of ongoing economic reforms.