KARACHI: Pakistan and the Asian Infrastructure Investment Bank (AIIB) have signed an agreement for $500 million loan that the South Asian country will receive to mitigate the adverse socio-economic effects of economic crises, the Pakistani finance ministry said on Thursday.
The AIIB will provide this loan under the Building Resilience with Active Countercyclical Expenditures (BRACE) program, which is an Asian Development Bank (ADB) financing initiative to enhance the resilience of poor and vulnerable groups to socio-economic shocks.
“The agreement was signed from the AIIB side by Konstantin Likitovskiy, Vice President Investment Operations, and Awais Manzoor Sumra, special secretary finances from the Pakistani side,” the finance ministry said in a statement.
“[The] signing took place during COP27 meetings in Sharm El-Sheikh in Egypt and was witnessed by Minister for Climate Change (Sherry Rehman).”
Pakistan's finance minister Ishaq Dar on Wednesday informed the AIIB board had approved the $500 million program for Pakistan.
“Board of Asian Infrastructure Investment Bank (AIIB) has today approved $500 million as co-financing of Asian Development Bank-funded BRACE program for Pakistan,” Dar said in a Twitter post.
“These Funds will be received by State Bank of Pakistan within November 2022.”
The cash-strapped South Asian country desperately needs dollar inflows to boost its depleting foreign exchange reserves and cool down its currency market, where the local currency is trading at historic lows against the United State (US) dollar.
Pakistan recently received $1.5 billion inflows from the ADB but the amount failed to ease off pressure on rupee.
The Pakistani central bank on Thursday announced that official reserves of the country had declined by $956 million to reach $7.96 billion due to external debt-servicing.
“Major external debt repayments executed during the week include repayment of GoP (Government of Pakistan) commercial loans,” the State Bank of Pakistan (SBP) said.
"Refinancing of these loans is in process which will improve foreign exchange reserves in coming weeks."
Pakistan is also expected to receive around $400 million from the World Bank under the Resilient Institutions for Sustainable Economy (RISE-II) program.
RISE-II had been delayed to accommodate the processes required by the government to implement the reforms outlined in the program.
However, Guangzhe Chen, regional director for the World Bank's South Asia Infrastructure, on Wednesday met Dar and congratulated the government on successfully completing the fiscal reform program.
