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The Asian Development Bank (ADB) has postponed the approval of an $800 million financing package for Pakistan following a formal request from India. Originally slated for discussion on May 28, the board meeting will now be held on June 3.
As per ADB rules, any board member is permitted a one-time delay in board proceedings. India exercised this option, pushing the decision forward by five days. According to the sources, this move comes shortly after India’s unsuccessful bid to block a $1 billion IMF tranche for Pakistan.
Breakdown of the Financing Package
The financing proposal comprises:
- A $300 million policy-based loan under ADB’s Resource Mobilization Program.
- A $500 million guarantee aimed at helping Pakistan raise to $1.5 billion in foreign commercial loans.
This guarantee is especially crucial given Pakistan’s current low credit rating, which remains at B-, despite a recent revision by Fitch Ratings. Because of this, the guarantee serves as a lifeline for securing funding in the global financial market.
Impact on Pakistan’s Financing Strategy
Despite the temporary delay, there has been no disruption to Pakistan’s broader external financing objectives. The government remains on track to raise over $1 billion in commercial loans, supported by the ADB guarantee.
For FY24, Pakistan has allocated $3.8 billion in foreign commercial borrowing. However, actual disbursements have remained modest, primarily due to the country’s weak credit profile. The ADB’s role is limited to offering a nominal fee-based guarantee, and the funds are intended to support reserves, not development projects.
