A worker walks past inside the Asian Development Bank (ADB) headquarters in Manila. PHOTO: REUTERS
ISLAMABAD:
The Asian Development Bank has unanimously approved a five-year indicative lending strategy of $10-$12 billion, which includes allocations to finance the exploration of critical minerals and the overdue Main Line-I project of Pakistan Railways.
The Indian CEO also endorsed the strategy at the ADB board meeting, although he made certain remarks about Pakistan’s governance and debt-related issues.
ADB on Wednesday launched a new Country Partnership Strategy (CPS) for Pakistan, 2026-2030, setting out a roadmap to support the country’s transition to sustainable and inclusive growth through private sector-led development, according to the local office of the Manila-based lender.
The lender said the five-year strategy will focus on three paths: enabling private sector development, promoting inclusion and empowerment, and increasing resilience and sustainability.
ADB did not formally indicate the size of the financing package. But the multilaterals and government officials said that based on current annual approvals, the indicative size is $10 billion to $12 billion over a five-year period.
Pakistan and ADB would negotiate the individual projects against the overall umbrella package over a period of five years.
They said the amount may increase further if Pakistan’s credit rating improves. The three credit rating agencies have recently upgraded Pakistan, but even the new ratings are not enough to secure cheaper long-term loans from the debt markets.
Pakistan currently uses an average of $2 billion in fresh ADB loans, half of which is concessional financing. Last year, the ADB approved a record $2.6 billion loan to Pakistan.
According to the approved CPS, ADB will extend financing, policy support and technical assistance to promote the development of critical mineral value chains in Pakistan.
“The new CPS is tailored to address Pakistan’s structural challenges and promote robust and sustainable growth that benefits the entire country, especially the poor and vulnerable,” said ADB Country Director for Pakistan Emma Fan.
“It promotes strategic investments and reforms across key sectors to stimulate economic growth and create jobs. ADB looks forward to supporting Pakistan’s public and private sectors in delivering on this ambitious agenda,” she added.
ADB will help maximize the value of Pakistan’s critical mineral deposits by supporting transparent governance frameworks, integrated infrastructure and strengthened social and environmental safeguards, the partnership document said.
The lender stressed that Pakistan hosts significant deposits of copper, barite and chromite along with other minerals such as gold, salt and marble. Despite its mineral endowments, mining and quarrying contribute only about 2.4% of Pakistan’s GDP and employ only about 0.2% of the workforce.
Mineral exports are modest. The gap between the mining sector’s economic potential and contribution reflects systemic challenges in infrastructure, governance and regulatory frameworks.
ADB will support the expansion of opportunities for critical minerals through modernized geodata systems, co-financing arrangements, and improved regulatory and fiscal frameworks.
According to the CPS, ADB will also assist in the effective establishment and implementation of sovereign wealth funds to ensure fair benefits and enable long-term investments for Pakistan’s sustainable development.
The lender also plans to provide a $500 million loan to support the reform of Pakistan’s pension and insurance systems and the development of capital markets to channel long-term savings into productive investments.
The five-year plan will also have appropriations for the infrastructure projects. Support for Main Line-I, Pakistan’s primary rail artery, will be a critical program under the new CPS, ADB stated.
It said upgrades to tracks, signaling systems and stations will transform Main Line-I into a modern and efficient transport route that can help Pakistan fulfill its growing role in regional integration.
Beijing had initially decided to fund the Main Line-I project as part of the China-Pakistan Economic Corridor initiative. China later decided to withdraw the bilateral financing arrangement due to Pakistan’s growing indebtedness.
The ADB said its future funding will also extend to the modernization of ports in addition to the development of national and provincial highways and expressways.
ADB will deepen its support for trade and logistics by modernizing and integrating supply chains and simplifying and harmonizing cross-border trade procedures.
ADB, together with the World Bank, has provided loans in these areas, but progress often remains below the benchmarks agreed upon at the time of signing these loan agreements.
The Partnership Framework Document states that Pakistan’s poverty remains high at 45% in the last financial year and is 2.5 times more prevalent in rural than urban areas. The top 10% of households earn 42% of the country’s income, and the bottom 50% only 13%.
The five-year package will also strengthen decision-making in disaster risk management, including through improved information management systems. ADB will support Pakistan in improving its climate governance, mobilizing climate finance and scaling up climate investment to promote resilience, adaptation and mitigation.
The lender stressed that Pakistan’s production and export bases are narrow, its business environment burdensome and its public financial management unbalanced. The infrastructure deficit is characterized by an inefficient energy sector, insufficient investment in railways and deficiencies in urban services.
More than 200 state-owned enterprises and state-owned entities owned by the government are valued at the equivalent of 48% of GDP. ADB said the public sector’s heavy footprint, a complex regulatory environment, overlapping and conflicting supervisory responsibilities and ineffective accountability mechanisms contribute to persistent governance challenges.
Among the 215 countries and territories assessed, Pakistan scores low – near the bottom quintile – across the Worldwide Governance Indicators, it added.
