ADB Approves $800 Million Support Package to Help Pakistan Strengthen Fiscal Discipline
In a major policy-backed initiative, the Asian Development Bank (ADB) has approved an $800 million fiscal reform program for Pakistan aimed at improving public financial management, tax mobilization, and private sector development.
The Improved Resource Mobilization and Utilization Reform Program (Subprogram 2) includes:
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A $300 million policy-based loan
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A $500 million policy-based guarantee—ADB’s first-ever of this type—which is expected to mobilize up to $1 billion in commercial financing
“Pakistan has made significant progress in improving macroeconomic conditions,” said Emma Fan, ADB Country Director for Pakistan. “This program backs the government’s commitment to further policy and institutional reforms that will strengthen public finances and promote sustainable growth.”
Key Goals of the Reform Program
The ADB package supports a wide-ranging fiscal reform agenda, with a focus on:
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Strengthening tax policy and compliance
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Improving cash and public expenditure management
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Enhancing transparency and digitalization of fiscal operations
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Boosting private sector participation and investment facilitation
These reforms are intended to:
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Shrink the fiscal deficit
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Reduce reliance on public debt
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Free up space for increased social and development spending
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Lay the foundation for long-term macroeconomic resilience
Why This Matters Now
The timing of the ADB support is critical. Pakistan has only recently emerged from a period of extremely high inflation and financial instability, and it is still undergoing a fragile economic recovery.
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In April 2025, ADB revised Pakistan’s GDP growth forecast to 2.5%, noting that economic stability hinges on successful implementation of fiscal reforms.
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The program coincides with the government’s ongoing efforts to prepare for the federal budget and negotiate a new IMF agreement.
Unlocking Private Capital
A standout feature of this package is the $500 million policy-based guarantee—a first for ADB in Pakistan. This mechanism is designed to attract commercial bank financing from global markets by de-risking private investment in Pakistan’s public financial reform trajectory.
If successful, it could mobilize up to $1 billion in non-concessional funding, providing vital liquidity without adding undue pressure to foreign exchange reserves.
Government Response: Diplomatic Win
Finance Ministry Adviser Khurram Schehzad called the approval a diplomatic and strategic success, crediting efforts by the Ministries of Finance and Economic Affairs.
“Diplomacy led by Economic Affairs and Ministry of Finance secures majority support at ADB Board,” Schehzad posted on X (formerly Twitter).
This approval also comes as Pakistan explores the use of carbon markets as a new frontier for green financing and sustainable growth, further reflecting the country’s broader reform momentum.
The Road Ahead
While the program is a strong vote of confidence in Pakistan’s reform commitment, its success will depend on:
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Execution of policy benchmarks
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Political continuity
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Public sector buy-in across departments
If implemented effectively, the ADB program could act as a catalyst for broader multilateral and private investment flows, supporting economic recovery, improved governance, and fiscal transparency.
