Pakistan, Asian Development Bank sign loan agreement worth USD 1.3 billion

Pakistan on Monday signed an agreement with the Asian Development Bank for a loan worth USD 1.3 billion to support the cash-strapped country's public finances and shore up its slowing economy. "Economic Affairs Division and ADB have signed policy-based loans of USD 1.3 Bn today. The sums will be disbursed today and will help bolster reserves and strengthen our economic outlook," Economic Affairs Minister Hammad Azhar tweeted.

On Friday, the bank said it has approved a USD 300 million policy-based loans that will help Pakistan to address financial sustainability, governance, and energy infrastructure policy constraints in the country's energy sector. Under the deal, the ADB will provide the loan to help stabilize the foreign exchange reserves of the country.

Pakistan is facing a serious economic crisis with short supplies of foreign currency reserves and stagnating growth in recent years. The ADB loan comes just days after investment rating agency Moody's changed Pakistan's outlook from negative to stable.

Since assuming power in August 2018, Prime Minister Imran Khan has been appealing to close allies like China and Saudi Arabia to provide loans to reduce the size of the bailout package that Islamabad sought from the International Monetary Fund (IMF). The ADB's quick dispersing special policy-based loan is part of a multi-donor economic reform program led by the IMF to stabilize Pakistan's economy after a major deterioration in its fiscal position in 2018, according to a statement by the Manila-based regional lender.

Under the agreement, USD 1 billion has been extended to Pakistan to improve its current account deficit and strengthen its revenue base. The financing will support the first of three sub-programs totaling USD 1 billion under Pakistan's Energy Sector Reforms and Financial Sustainability Programme, the bank said.

Apart from the ADB loan, the Pakistan government has borrowed USD 10.40 billion from friendly countries like China and the UAE to stabilize the foreign exchange reserves and repayment of old loans.

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