The Asian Development Bank (ADB) has guaranteed Pakistan $2 billion in fresh loans a year, with Islamabad requesting half of that amount on favorable terms as the government struggles to secure lower-cost borrowing because of its declining ratings.
According to officials of the Ministry of Economic Affairs, visiting ADB president Masatsugu Asakawa promised to offer $2 billion annually during his meeting with Pakistani authorities.
As reported by authorities on Monday, the Manila-based lender was projected to contribute $2 billion year between 2024 and 2027. The entire $8 billion four-year program is being offered. The ADB would contribute about $1 billion of the $2 billion at a fixed 2% rate through its concessional window.
Pakistan is become a desperate borrower, making loans at unaffordably high interest rates (from 7% to as much as 11% in recent years). This month, the finance ministry and a bank reached a $600 million agreement at the highest interest rate of 11% in US dollars.
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Despite an agreement at the staff level between Pakistan and the International Monetary Fund (IMF), the bank did not lower interest rates, demonstrating the lender’s mistrust of Islamabad’s creditworthiness.
Pakistan’s inability to access international financial markets is presently hampered by the three international credit rating agencies’ classification of the country as below investment grade.
Concessional funding from the ADB is less expensive than lending from the IMF.
The IMF’s Extended Fund Facility program has an interest rate of about 5%, according to information released by the ministry of economic affairs last month.
The ADB president assured Pakistan, according to a press release from the ministry of economic affairs, that Pakistan would continue to receive its support for public-private partnerships, improving climate and disaster resilience, mobilizing domestic resources, advancing women-inclusive finance, and energy sector reforms.
