The Asian Development Bank (ADB) on Wednesday released $1.5 billion to Pakistan, which is facing a daunting task of arranging about $32bn for debt servicing during the current financial year.
“Asian Development Bank has released funds $1.5 billion to Pakistan under BRACE programme for the credit of the government of Pakistan’s account with State Bank of Pakistan. AlhamdoLilah!” Finance Minister Ishaq Dar tweeted after the release of the loan.
The BRACE (Building Resilience Under Active Countercyclical Expenditures) programme aims to support the government’s efforts to deal with the adverse impacts of devastating floods, supply chain disruptions, rising energy, fuel prices and inflation on the poor and vulnerable.
Later, the State Bank announced that it had received $1.5bn from the ADB “as disbursement of policy based loan for the government of Pakistan. These proceeds have increased the forex reserves of SBP and will be reflected in the reserves for the week ending Oct 28”.
On Aug 30, Pakistan received $1.1bn from International Monetary Fund (IMF) after its board approved the seventh and eighth reviews of Pakistan’s bailout programme. The IMF agreed to extend the programme by a year and increase the total funding by 720 million special drawing rights, or about $940m at the current exchange rate.
The IMF’s approval of funding for Pakistan opened gates for inflows from other affiliated creditors. Before the ADB, the World Bank on Sept 25 said it would provide $2bn in aid to Pakistan for reconstruction and rehabilitation, including food, shelter and other urgent needs of the victims of recent devastating floods.
The inflows will help Pakistan improve its foreign exchange reserves.
The reserves of the State Bank fell by $9bn during 10 months of the current fiscal year to $7.6bn on Oct 14. The $1.1bn inflow from the IMF was consumed quickly as debt servicing has mounting pressure on the external front, which requires about $32bn during FY23.
The country is to pay $1bn to foreign investors against the maturing of five-year Sukuk bonds on Dec 5 this year. Mr Dar claimed on several occasions that Pakistan would pay the maturing amount.
The inflows from the IMF, World Bank and ADB are not enough to meet the country’s requirement for foreign payments.
The prime minister is scheduled to visit China on Nov 1 and expected to hold negotiations on rollover of Chinese loans. Of the $30bn non-Paris Club loans, Chinese loan is about $23bn. The rollover could help Pakistan avoid the default-like situation.
Despite the report about release of ADB funds in the afternoon, the rupee lost 95 paise in the interbank market, closing at Rs220.68 on Wednesday.
The open market is not providing correct dollar rates. Exchange companies are mostly short of dollars.
The rate provided by the Exchange Companies Association of Pakistan showed that the dollar was traded at Rs224.40 in open market on Wednesday against Rs222.90 a day earlier, up Rs1.50.