ADB says loan talks ongoing after Pakistan claims $3.4 b agreed

Manila-based lender distances itself from govt's claim - Reuters

ISLAMABAD (Reuters): The Asian Development Bank said talks to provide Pakistan with financial support were ongoing, contradicting Pakistani officials who announced over the weekend that the lender has agreed to provide $3.4 billion in support.

On Saturday, Pakistan’s de facto finance minister Hafeez Shaikh met a senior ADB official and afterwards tweeted that “the ADB will provide $3.4bn in budgetary support to help with reforms and stabilization of the economy”.

The ADB support would be in addition to the $6 billion loan that Pakistan has provisionally agreed with the International Monetary Fund (IMF), to help stabilize a ballooning current account and fiscal deficits. The IMF board is expected to approve that loan in coming weeks.

In a rare move, the ADB on Sunday released a statement to clarify that while the lender is “pleased with the progress of discussions” with Pakistan’s government, the talks are not concluded.

 “These discussions are ongoing and details of the plans as well as the volume of ADB’s financial support, once finalised, will be contingent upon the approval of ADB management and its Board of Directors,” said Xiaohong Yang, ADB Country Director for Pakistan.

Pakistan’s economic outlook has sharply deteriorated over the past year. Growth is set to hit 3.3% in the current fiscal year ending June, some way down from the government’s target of 6.2%. Economic activity is expected to continue falling, with growth forecast to decline to 2.4% in the next financial year.

Inflation, which hit 9% in May, is seen at 11-13% during fiscal year 2019/2020.

In the annual budget statement last week, Pakistan said it would run a fiscal deficit of 7.1%, down from 7.2% in the previous year.

Shaikh, who is the prime minister’s advisor on finance, said from the proposed $3.4 billion ADB loan, some “$2.2 billion will be released this fiscal year, starting in the first quarter of FY 2019-20. This will help the reserve position and the #external account.”