On Tuesday morning, State Bank of Pakistan (SBP) has announced officially that it has received a $1.3 billion loan from Asian Development Bank (ADB). The central bank of Pakistan has confirmed the news on its official twitter.
The government of Pakistan earlier on Monday signed a loan with ADB worth $1.3 billion in order to support budget and reforms in the power sector. According to the details, the money would be spent on the necessary budgetary needs of the country and bringing reforms in the power sector. According to The Nation, Pakistan’s foreign currency reserves are likely to surge to $11 billion by the end of this year.
Earlier it was reported that ADB approves a $300 million loan to Pakistan in order to tackle its ballooning circular debt problem. However, the final loan amount exceeds the earlier estimations. ADB has also added the funds for budgetary problems in this loan deal. According to Mr. Werner Liepach, director-general for central and West Asia ADB, “Pakistan is currently facing cash shortfall across the power supply chain, also known as circular debt which has elevated significantly to $10 billion which becomes a chronic issue ailing the country’s power sector.”
The plan is to cut the flows of circular debt drastically and provide the policy directions on accumulated circular debt.
The new loan agreement was signed by Economic Affairs Division (EAD) Secretary Dr. Syed PErvaiz Abbas and ADB Country Director Xiaohong Yang, along with Federal Minister for Economic Affairs Division Hammad Azhar.
The additional $1 billion loan was approved for emergency budget support for 7 years at the rate of LIBOR+2 percent. Further as mentioned earlier $300 loan was approved specifically for power sector reforms on 2 percent per annum interest rate payable in 20 years. The recent loan would further help the country to maintain its energy costs, energy generation, and improved government spending in critical economic areas.