Asian Development Bank approves $300 million loan for Pakistan's macroeconomic stability

MANILA, PHILIPPINES: The Asian Development Bank (ADB) on Friday greenlighted a $300 million policy-based loan to Pakistan so that the country could work towards its macroeconomic stability by diversifying export and improving trade competitiveness.

In an official statement, the bank said that while the country is at a crucial juncture in terms of its macroeconomic recovery because of COVID-19, the government's efforts have started showing promising results for the ongoing year.

“ADB’s programme will support these efforts and help Pakistan to improve its export competitiveness — now more important than ever given the impacts of the pandemic," said ADB Principal Public Management Specialist Hiranya Mukhopadhyay.

Through ADB’s programme, Pakistan will sustainably recover its current account deficit while continuing to facilitate export diversification, the statement read, adding that the bank will help the country improve its international competitiveness by introducing tariff- and tax-related policy reforms. 

"[The programme will also] further strengthen key institutions of the country, including accreditation bodies, the Export–Import Bank of Pakistan, and the Pakistan Single Window."

Trade and competitiveness 

According to the statement, ADB's new financing for Pakistan falls under Subprogram 2 of the Trade and Competitiveness Programme.  It said that under the first phase of the programme, the bank helped the Pakistani government to introduce key reforms.

For instance, tariffs and duties were reduced or abolished on a large number of raw materials and intermediate goods, while several measures were taken to make key institutions stronger.

"Since fiscal year 2004, Pakistan has registered a rise-and-fall pattern of export growth reflecting underperformance in its export industry and long-term decline in export competitiveness. This is compounded by lost export growth momentum from COVID-19, which has reduced high-income countries’ demand for manufacturing goods and disrupted the supply of raw materials," the statement added.

The bank said that it is coordinating its efforts with other development partners and donors while the programme complements International Monetary Fund-led reform initiatives by helping to improve competitiveness, which will help build robust foreign exchange reserves.