According to a statement released by the Asian Development Bank (ADB) on Friday, $1.5 billion in financing has been approved to support Pakistan in providing social protection, promoting food security, and supporting employment for its people amid devastating floods and disruptions to the country’s supply chains.
This loan has been made available via the Building Resilience with Active Countercyclical Expenditures (BRACE) initiative of ADB.
According to the official information provided by the SBP on Thursday, the foreign currency reserves held by the State Bank of Pakistan on October 14, 2022, were estimated at $7.5 billion. With reserves at such a low level, less than two months of import coverage would hardly be possible.
With a projected current account deficit of $10 to $12 billion and an external debt servicing requirement of $22.9 billion, Pakistan needs $34 billion for the current fiscal year.
The severe floods, on the other hand, made the already difficult situation in the economy even worse. Pakistan faced losses of $32.4 billion, according to the consortium of international donors, which also included the World Bank, ADB, UNDP, and EU. Pakistan also needed $16.2 billion for construction costs.
According to ADB, this loan would contribute to the government’s $2.3 billion countercyclical development expenditure program, which is intended to lessen the effects of external shocks like the Russian invasion of Ukraine.
External shocks have impeded Pakistan’s recovery from the COVID-19 pandemic, according to ADB Director-General for Central and West Asia Yevgeniy Zhukov.
Millions of Pakistanis are being impacted by rising living costs and rising business costs, especially the poor and vulnerable. The government will benefit from ADB’s initiative as it works to mitigate the effects of high prices, rising food insecurity, slow economic growth, and decreased income for vulnerable groups, many of whom are still suffering from the devastating impact of floods.
The government’s countercyclical development expenditure package, which is aimed at Pakistan’s poorest families who are frequently disproportionately affected in times of crisis, would be able to be implemented with the help of ADB’s financing, according to the bank’s official statement.
The government’s assistance includes specific measures to promote gender empowerment and climate change adaptation, both of which have become extremely important in light of the recent floods.
The support from ADB will help increase the number of families receiving cash transfers from 7.9 million to 9 million, increase the enrollment of children in primary and secondary schools, and improve the geographic coverage of health services and nutritional supplies for infants under 2 years old and pregnant women and nursing mothers.
“The program is part of a comprehensive and well-coordinated support package.” According to ADB Director for Public Management, Financial Sector, and Trade Tariq Niazi, it will help the government in coping with the impacts of the immediate shocks to the economy while continuing the structural reforms needed to improve the country’s medium- to long-term macroeconomic prospects.
We are closely working with the International Monetary Fund and other development partners to ensure that our support through policy discussion, technical assistance, and program lending is well-coordinated and that, ultimately, we can help the government improve Pakistan’s resilience to shocks.ADB Director for Public Management, Financial Sector, and Trade Tariq Niazi
In response to recent floods in Pakistan that have affected over 33 million people and severely damaged infrastructure and agriculture, ADB is providing $1.5 billion in countercyclical support as part of a significant response package.