The Asian Development Bank has approved a USD 300 million policy-based loan to Pakistan to help promote macroeconomic stability in the cash-strapped country. The announcement by the Philippines-headquartered lender came a week after Pakistan secured USD 800 million worth of debt freeze deals from 14 members of the G20. As of August this year, the country owes USD 25.4 billion to the group of 20 rich nations.
The USD 300 million loan would improve trade competitiveness and export diversification, said Hiranya Mukhopadhyay, Principal Public Management Specialist at the Asian Development Bank (ADB). While COVID-19 hit Pakistan at a critical point in its macroeconomic recovery, the government's ongoing efforts to ensure stability have started showing encouraging results this fiscal year, Mukhopadhyay said in a statement.
The ADB's programme will support Pakistan's efforts to improve its export competitiveness which was more important than ever given the impacts of the pandemic, he said, adding that it is expected to enable Pakistan in recovering current account deficit in a sustained manner as well as facilitate export diversification. It will introduce important tariff- and tax-related policy reforms to help improve Pakistan's international competitiveness and further strengthen key institutions, including accreditation bodies, the ExportImport Bank of Pakistan, and the Pakistan Single Window.
The bank said that several steps were also taken to introduce e-commerce, strengthen key institutions involved in facilitating trade, and enhance the export certification process. The new financing falls under Subprogram 2 of the Trade and Competitiveness Programme.
Under the first phase, the ADB helped the government usher in key reforms, including reducing or abolishing tariffs and ad hoc duties on a large number of raw materials and intermediate goods. Pakistan has been facing the dilemma of rise and fall in the export growth showing underperformance of its export industry. It was further compounded by the coronavirus.
International financial institutions like the ADB provide help to address such issues and the latest loan facility was its manifestation. Pakistan along with 76 other poor African countries had qualified for the G-20 debt relief initiative, announced in April this year for May-December 2020 period, to combat the adverse impacts of the COVID-19 pandemic.
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