The Asian Development Bank’s $800 million package aims to bolster Pakistan’s fiscal sustainability and public financial management. The Asian Development Bank (ADB) approved a USD 800 million financing package for Pakistan on Tuesday, June 3, 2025, in Manila, Philippines, to enhance fiscal sustainability and improve public financial management. The programme, including a USD 300 million loan and a USD 500 million guarantee, supports economic reforms to reduce fiscal deficits.
Why This Matters in South Asia
Pakistan’s fiscal challenges, with public debt nearing 75 per cent of GDP, impact regional economic stability in South Asia, where interconnected economies rely on robust financial systems. The Asian Development Bank’s support could stabilise Pakistan’s economy, fostering growth and enabling increased social spending, which may inspire similar reforms across the region.
Asian Development Bank’s Financial Package
The ADB’s Improved Resource Mobilisation and Utilisation Reform Programme, Subprogramme 2, comprises a USD 300 million policy-based loan and a USD 500 million policy-based guarantee, the latter being the ADB’s first of its kind. This guarantee is expected to mobilise up to USD 1 billion from commercial banks, amplifying the programme’s impact. According to ADB Country Director for Pakistan Emma Fan, “Pakistan has made significant progress in improving macroeconomic conditions. This programme backs the government’s commitment to further policy and institutional reforms that will strengthen public finances and promote sustainable growth.”
The package was confirmed by Khurram Schehzad, Adviser to Pakistan’s Finance Minister, who stated on X, “ADB approves USD 800 million financing package for Pakistan under the Resource Mobilisation Reform Programme.” The funds aim to address Pakistan’s fiscal deficit and public debt while creating fiscal space for social and development spending.
Reforms for Fiscal Sustainability
The programme supports reforms in tax policy, administration, and compliance to boost domestic revenue. It also enhances public expenditure and cash management, promoting efficiency in resource allocation. According to the ADB, these measures are designed to reduce Pakistan’s fiscal deficit, which has strained the economy amid rising debt.
Additionally, the initiative promotes digitalisation, investment facilitation, and private sector development. These reforms aim to broaden Pakistan’s revenue base and foster economic self-reliance, as noted by The Express Tribune, which quoted ministry officials stating the programme will “enhance domestic resource mobilisation and stabilise the economy through financial reforms.”
Comprehensive Support Package
The ADB’s programme is underpinned by technical assistance and coordination with development partners, including the International Monetary Fund, to ensure long-term fiscal resilience. This collaborative approach strengthens Pakistan’s ability to implement reforms effectively. The package also aligns with Pakistan’s broader economic strategy, which includes improving infrastructure, energy, and social services, as highlighted by the ADB’s commitment of over USD 52 billion to Pakistan since 1966.
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Background
Pakistan, a founding member of the Asian Development Bank since 1966, has received over USD 52 billion in loans, grants, and other financing for infrastructure, energy, food security, and social services. The country faces persistent fiscal challenges, with tax revenues among the lowest in emerging markets. Recent macroeconomic improvements, as noted by Emma Fan, provide a foundation for these reforms. The ADB’s support follows other regional initiatives, such as a USD 500 million loan to Indonesia for energy sector reforms and a USD 30 million loan to the Solomon Islands for fiscal and climate resilience, reflecting the bank’s broader commitment to sustainable development in Asia-Pacific.
What’s Next
The Asian Development Bank’s financing is expected to catalyse further economic reforms in Pakistan, with implementation monitored closely by development partners. The success of these reforms will be critical for sustaining fiscal stability and fostering inclusive growth in the region.
Published in SouthAsianDesk, August 23rd, 2025
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