ISLAMABAD: Pakistan to get $300 million loan from Asian Development Bank (ADB) to release pressure from country’s fragile foreign exchange reserves. Pakistan have already met all conditions, mainly to lowering barriers to imports.
According to details, Board of Directors of the ADB, Manila-based lending agency is likely to approve the $300 million worth of second tranche of the Trade and Competitiveness Programme in the last week of current month.
The $300 million is part of the $800 million budgetary support programme and the regional lender has already disbursed the first tranche in August last year.
The ADB has so far extended over $600 million in loans to Pakistan in the current fiscal year and after the upcoming approval, its lending will jump close to $1 billion. However, about 60% of lending is in the shape of policy loans, which are not helpful in the long run.
Both the money and timing of approval are crucial for Pakistan when the $6-billion International Monetary Fund (IMF) bailout package has been technically suspended since February this year. The approval of the policy loan will be an indication to markets that global lenders are still engaged with Islamabad, although the government is currently sailing through choppy waters.
The loan will partially support the gross foreign exchange reserves, which currently stand at $12.1 billion, ahead of some major unplanned repayments including $2 billion to Saudi Arabia. Sources said the government had made adequate arrangements so that forex reserves could remain around current levels.
The loan of $300 million is being sought in the name of trade reforms, like the first tranche of $500 million. Despite the $500-million loan, there was no improvement in the country’s exports that remained flat, even in the pre-coronavirus situation. Pakistan is annually paying 2% in interest on the $500-million loan, taken for 25 years.
