ADB’s Assistance to Pakistan: A Journey from Poverty to Prosperity

Asia-Pacific region is home to two-thirds of the world’s poor population and with the intervention of the Asian Development Bank (ADB), the region has become the growth centre of the global economy since the inception of the 21st century. Despite the ongoing (COVID-19) pandemic, ADB has played a pivotal role in alleviating poverty, furthering socio-economic development, and realizing sustainable, inclusive, and holistic development in the South Asia region. The global development regime faced a huge setback due to the contagion but for developing economies like Pakistan it worsened the bottlenecks and to overcome the quandary, ADB launched COVID-19 Active Response and Expenditure Support (CARES) Program. The rationale of the CARES program was to assist the government of Pakistan in mitigating the detrimental impacts of COVID-19 on the country’s socio-economic development through budgetary support and to ensure recovery in growth and employment and provide pro-poor fiscal stimulus in addition to the countercyclical development expenditures. 

 

 “This pandemic threatens to severely set back economic, social, and development gains in Asia and the Pacific, reverse progress on poverty reduction, and throw economies into recession.”- ADB President Masatsugu Asakawa.

In January 2021, a five-year (2021-2025) Country Partnership Strategy for Pakistan was also endorsed by ADB marking out the three key strategic areas of cooperation, such as a focus on growth through ameliorating the economic management in the country, building resilience through developing human capital and provision of social protection, and lastly, boosting competitiveness and private sector development. The ADB board of directors noted that although structural reforms have been put into effect by Pakistan in 2019 but the COVID-19 pandemic has disrupted the recovery process and therefore ADB extended their added support in form of a CARES program for overcoming the setback and catalyzing the economic growth. Moreover, the meeting concluded with a suggestion to be selective in terms of group and locality for the ADB intervention in the country and to maintain strong coordination with other development partners active in Pakistan for enhancing the development impact. 

ADB is one of the largest development partners of Pakistan and for the last five decades, it has funded approx. $33billion to meet the development needs of the country, especially for poverty alleviation, economic growth, and achieve the development goals of the country.

Poverty indicators show that 24.3% of people are currently living below the national poverty line in Pakistan, the unemployment rate is 4.5%, and the mortality rate under-5 is 69 per 1000 lives. This is why, eradicating poverty and overcoming inequalities is the first pillar of the ADB-supported operations in Pakistan and according to the Development Effectiveness Review (April 2020), the organization has been successful in improving the education or training of 104 people, generating more than 2135 jobs, and establishing one social protection scheme. Similarly, in 2019 ADB has sanctioned an additional $200 million loan to assist the Ehsaas Programme (the flagship social protection project of the incumbent government of Pakistan) which will support more than 5million families of Pakistan and so far it has enabled the enrollment of over 855,000 women beneficiaries to BISP, or about 15% of the eligible beneficiaries. Moreover, in the Country Partnership Strategy 2021-25, ADB committed to help the underprivileged segment of society and to alleviate poverty through skill development, social protection, quality education, boosting economy, increasing employment and focusing on new strategies to reduce poverty, which will enable all Pakistani to enjoy the fruits of sustainable and inclusive growth. 

In terms of poverty reduction, ADB is also committed to mitigating the challenges of climate change in its member countries through financing climate resilience projects, such as clean energy and affordable housing, harnessing technology, and developing skills of the citizens, and through its independent assessments, which consider climatic impacts of development as their essential component. In the case of Pakistan, ADB is assisting the country in its transition to clean energy, such as financing hydro development projects, cleaner public transport, developing or improving infrastructure as low-carbon assets, making cities more livable etc. The results of the initiative undertaken by ADB under its operational pillar 3, namely tackling climate change, building climate and disaster resilience, and enhancing climate sustainability resulted in reducing in approx. 3.8million tCO2e/year.

Pakistan acquired membership of ADB in 1966 and ever since ADB has disbursed $25.18 billion approx. in cumulative loan and grants to Pakistan. These comprised of $33.5 billion in loans, $148.5 million in grants, $190.7 million in technical assistance projects, and $570 million in ADB-administered co-financing in Pakistan.

In addition to this, ADB has also focused on the socio-economic empowerment of women of Pakistan and has facilitated the women of Pakistan through the improvement of the justice system, microfinancing, and helping the rural women through providing biogas plants and developing their skills. ADB Country Director for Pakistan Xiaohong Yang recently said, “Pakistan could raise GDP by as much as 30% if it can close the gender gap.” He added, “ADB will prioritise interventions to cut women’s time poverty and drudgery by improving their access to modern technology, particularly in the agriculture sector, connecting them to affordable and reliable energy, and contributing convenient water supply and sanitation solutions.” ADB is helping women and girls in Pakistan understand their legal rights through community outreach activities such as puppet shows, plays, and truck art.

In terms of the economic outlook of Pakistan, the recent assessment report of Pakistan highlighted that country is suffering from low exports, a shortfall in government income and low-tax collection, which is resulting in uneven growth. The situation has been exacerbated by the COVID-19 pandemic and nationwide lockdowns imposed by different countries, which had an impact on global trade, especially exports. ADB responded to the amplified challenges of Pakistan by providing loans, technical assistance, grants, and equity investments to promote social and economic development. After a thorough assessment, the financial regime suggested improving the national economic outlook through the revitalization of public sector enterprises, promoting domestic resource mobilization and the capital market, helping the poor in the rural region to gain decent jobs, and continue to improve social protection, quality education and health services. To shore up the public finances, ADB sanctioned $1billion budgetary support and $500million for enhancing the trade competitiveness to Pakistan in 2019. 

ADB operations in Pakistan will increase significantly in the next 3 years with continued focus on energy, natural resource management, urban development, transport infrastructure, and institutional reforms, as well as re-engagement in education and health.

Moreover, the upper echelons of the supranational regime committed to keep a close check on the debt situation and make efforts to disburse additional concessional funds to alleviate the debt burden and make it sustainable. An equal focus has been given to the effective resource mobilization at the grassroots and enhancing the public sector management through reforms in energy, trade and capital markets for cumulating the low tax to GDP ratio by ADB’s working group. Similarly, a suggestion has been made to broaden the country’s tax base, committing to policy reforms, and improving the country’s business environment. It has been emphasized that reforms are required to promote high value-added exports, expand social spending, progress energy sector development, and strengthen institutions. The directors of ADB emphasized value addition and furthering the synergy between reform programs and infrastructure investments, and between sovereign and non-sovereign lending, which should conform with the recommendation of the independent evaluation department.

In 2020, ADB came up with a 5-year program where $10 billion will be spent on economic stability and growth where employment and economic opportunities will be provided to the citizens. 

On top of that, the COVID-19 pandemic has exacerbated the economic difficulties and risks of climate change and food/water security further threatens the sustainability of hard-earned gains. Achievements of ADB in Pakistan (from 2010 to 2015)

  • 2.5 million New households connected to electricity
  • 8600 km Roads built and upgraded
  • 24.6 million Improved educational facilities
  • 6.5 million Households with new or improved water supplies
  • 2.2 million Women supported with microfinance
  • 14.7 million hectares of land improved through irrigation, drainage, and flood management

A glance at the interventions of ADB in Pakistan, it is evident that the organization places a greater focus on domestic resources mobilization, combining institutional reforms with physical and social infrastructure investments to generate sustainability and development impact.

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