ISLAMABAD: The Asian Development Bank (ADB) will today (October 21) finalize a $1.5 billion loan to Pakistan under the Building Resilience with Active Counter-Cyclical Expenditure (BRACE) programme.
The loan is expected to be released next week after approval to help Pakistan boost its dwindling foreign exchange reserves.
The Asian Infrastructure Investment Bank (AIIB) is also expected to approve $500 million in co-financing, bringing the total disbursement to $2 billion within the current month.
According to official data released by the State Bank on Thursday, foreign currency reserves with the State Bank of Pakistan stood at $7.5 billion as on October 14, 2022. Such a low level of reserves can hardly meet the import coverage requirements of less than two months.
Pakistan has an external debt servicing requirement of $22.9 billion in the current fiscal year and a current account deficit of $34 billion, taking into account estimates in the range of $10-12 billion. On the other hand, the devastating floods added to the woes of the struggling economy.
A consortium of global donors, including the World Bank, ADB, UNDP and the EU, estimated that Pakistan suffered losses of $32.4 billion and needed $16.2 billion for reconstruction costs.
According to an official document, the $1.5 billion BRACE program loan will help Pakistan respond to the worsening economic crisis stemming from the Russian invasion of Ukraine and devastating floods that have affected some 33 million people. are
Pakistani authorities started working on this loan before the recent floods. To mitigate the negative impact of cumulative external shocks, particularly on the poor and vulnerable, the government’s counter-cyclical measures amount to about $2.4 billion.
The BRACE program will provide the government with general budget support that will help it create the fiscal space needed to finance its crisis response and relief measures and vulnerabilities, and facilitate economic resilience to future shocks.
The government has agreed to strong governance measures to ensure stability and build capacity, including the establishment of a steering committee of stakeholders to oversee the implementation of relief and response measures; A government-led platform for monthly coordinated discussions on policy dialogue with development partners; Submission of quarterly reports to ADB and verification of selected disaster management framework indicators through independent surveys under ADB technical assistance.
