ADB to decide on Pakistan's loan package after a week's delay on Indian request
The Asian Development Bank (ADB) has postponed a decision on an $800 million
financing package for Pakistan after India requested more time to review the
loan documents — a move that has raised concerns over procedural loopholes
within the ADB’s governance framework.
According to government officials, the ADB board
had originally scheduled a meeting for May 28 to approve $300 million in budget
support and a $500 million guarantee intended to help Pakistan secure foreign
commercial loans. However, the meeting was deferred by five days, now set to
take place on June 3.
Economic Affairs Secretary Dr. Kazim Niaz
confirmed the delay, stating it came at the request of the Indian executive director
under a rule that allows any board member to request a one-time extension.
“There was no lapse on the part of Pakistan or its board nominee,” Dr. Niaz
emphasized, adding that the matter was raised at the highest levels within the
ADB.
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He further noted that most board members and
the ADB management supported Pakistan’s position that such forums should not be
used for political maneuvering.
India’s request followed its unsuccessful
attempt to block a $1 billion loan tranche to Pakistan from the International
Monetary Fund (IMF), prompting observers to view the move as part of a broader
strategy to undermine Islamabad’s economic progress through diplomatic
channels.
Despite the delay, officials said Pakistan’s
external financing plans remain on track, and the funds are expected to be
transferred to the State Bank of Pakistan after board approval on June 3. The
guarantees are especially critical given Pakistan’s low credit rating, as they
are tied to a $1 billion agreement with two international commercial banks.
Pakistan could leverage the $500 million ADB guarantee to secure up to $1.5
billion in commercial loans.
Currently, Pakistan’s gross foreign exchange
reserves stand at $11.4 billion. The government aims to boost this figure to
over $14 billion by the end of June, aided by stronger remittances, new
ADB-backed commercial borrowing, and the refinancing of $3.7 billion in Chinese
commercial loans.
The ADB’s $300 million policy-based loan is
part of the Resource Mobilization Programme, designed to support reforms at the
Federal Board of Revenue (FBR) to improve tax collection. While Pakistan has
fulfilled all the prerequisites for the disbursement, critics argue such reforms
should be financed domestically, rather than through external borrowing.
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Independent analysts also warned against
over-reliance on budget support loans, pointing out that the ADB's current
package is not meant for development projects but for shoring up reserves.
Despite a recent upgrade by Fitch from
“restricted default” to “high risk of default” (B-), Pakistan’s credit rating
remains well below investment grade. The ADB is expected to charge only a
nominal fee for providing the guarantee, a necessary step for Pakistan to
access foreign commercial markets.
Questions remain over whether the ADB’s platform should be used to pursue political objectives. Requests for comment from the ADB’s local office regarding the postponement and procedural allowances went unanswered. However, those familiar with ADB procedures noted that any member state may request up to two working days to conduct due diligence on a proposed loan.
Source: Express Tribune