ADB sanctions $800m to strengthen Pakistan's public finances
The Asian Development Bank (ADB) has sanctioned an $800
million loan and guarantee programme aimed at strengthening Pakistan’s fiscal
management and public finances.
The initiative—titled Improved Resource Mobilisation and
Utilisation Reform Programme, Subprogramme 2—comprises a $300 million
policy-based loan alongside ADB’s first-ever policy-based guarantee of up to $500
million. The guarantee is expected to mobilise an additional $1 billion from
commercial banks.
This programme builds on Subprogramme 1, launched in
December 2023, which laid the foundation for fiscal reforms and institutional
capacity development.
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Under Subprogramme 2, the focus will shift toward
strengthening tax policy and compliance, enhancing expenditure and cash
management, promoting digitalisation, and fostering private sector investment.
According to ADB, the reforms are designed to narrow
Pakistan’s fiscal deficit and reduce public debt while creating fiscal space
for social and development spending. The programme is backed by technical
assistance and partnerships with other development institutions to ensure
long-term fiscal resilience.
The policy-based guarantee mechanism aims to reduce credit
risks for commercial lenders to Pakistan, enabling greater private capital
mobilisation in the current fiscal year.
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Despite progress, ADB cautioned that Pakistan continues to
face deep-rooted structural issues, including a limited tax base that
constrains fiscal sustainability and undermines the government’s ability to
adequately fund social and development priorities.
Source: Profit Pakistan