Asian Development Bank (ADB) has approved a $300 million policy-based loan to help promote macroeconomic stability in Pakistan by facilitating improved trade competitiveness and export diversification.
“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,” said ADB Principal Public Management Specialist Hiranya Mukhopadhyay.
“ADB’s program will support these efforts and help Pakistan to improve its export competitiveness now more important than ever given the impacts of the pandemic.”
ADB’s program will help Pakistan recover its current account deficit in a sustained manner and continue to 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 Export-Import Bank of Pakistan, and the Pakistan Single Window.
The new financing falls under Subprogram 2 of the Trade and Competitiveness Program. Under the first phase, 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. Several steps were also taken to introduce e-commerce, strengthen key institutions involved in facilitating trade, and enhance the export certification process.
Since the fiscal year 2004, Pakistan has registered a rise-and-fall pattern of export growth reflecting underperformance in its export industry and long-term decline in export competitiveness.
This is compounded by lost export growth momentum from COVID-19, which has reduced high-income countries’ demand for manufacturing goods and disrupted the supply of raw materials.
ADB is coordinating its efforts with other development partners and donors while the program complements International Monetary Fund-led reform initiatives by helping to improve competitiveness, which will help build robust foreign exchange reserves.