Pakistan signs a loan agreement worth $1.2 billion with the Asian Development Bank (ADB).

On Wednesday, the Asian Development Bank (ADB) officially announced the completion of a $1.2 billion loan agreement with Pakistan, signed on December 15. This agreement encompasses budgetary support, initiatives for domestic resource mobilization, and includes six projects specifically targeting the financial empowerment of women.

Of the total loan amount, at least one-third will be dedicated to budget financing, aiming to alleviate financial constraints and streamline blocked funding pipelines following Pakistan's agreement with the International Monetary Fund (IMF). The Economic Affairs Division (EAD) and ADB finalized the loan agreements last Friday, with an EAD official confirming the specifics. The ADB is set to allocate $400 million for budget support through two separate agreements.

In parallel developments, the World Bank's executive directors' board approved $350 million in financing for the Second Resilient Institutions for Sustainable Economy (RISE-II) Operation. This funding is directed towards fortifying fiscal management and fostering competitiveness to achieve sustained and inclusive economic growth. According to Najy Benhassine, the World Bank country director for Pakistan, urgent fiscal and structural reforms are crucial to restoring macroeconomic balance and laying the groundwork for sustainable growth.

RISE-II represents a continuation of prior reforms, focusing on tax, energy, and business climate improvements to enhance revenue generation, optimize expenditure targeting, and stimulate competition and investment. The operation's objectives include improving fiscal policy coordination, enhancing debt transparency and management, strengthening property taxation, and enhancing the financial viability of the power sector.

Moreover, the World Bank initiative aims to promote growth and competitiveness by reducing the costs associated with tax compliance, enhancing financial sector transparency, encouraging digital payments, and boosting exports through reduced import tariffs. Derek HC Chen, the task team leader of the operation, emphasized the importance of seizing the opportunity, laid through RISE II and support from other international financial institutions, for Pakistan to address long-standing structural distortions in its economy following the upcoming general elections. Failing to capitalize on this opportunity could risk reverting the country to cyclical economic challenges.