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 for financing the exploration of critical minerals and dilapidated Main Line-I project of Pakistan Railways.
Indian Executive Director also supported the strategy in the ADB’s board meeting, although he made certain observations about Pakistan’s governance and debt related issues.
The 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 that the five-year strategy will focus on three pathways: enabling private sector development, advancing inclusion and empowerment, and enhancing resilience and sustainability.
The ADB did not formally indicate the size of the financing package. But the multilateral and the government officials said that based on the current annual approvals, the indicative size is $10 billion to $12 billion over a period of five years.
Pakistan and the ADB would negotiate the individual projects against the overall umbrella package over a period of five years.
They said that the size can further go up, if Pakistan’s credit rating is improved. The three credit rating agencies recently upgraded Pakistan but even the new ratings are not enough to secure cheaper long-term loans from the debt markets.
Pakistan is currently availing on an average $2 billion in fresh ADB lending, half of it is concessional financing. Last year, the ADB approved $2.6 billion record loans for Pakistan.
According to the approved CPS, the ADB will extend financing, policy support, and technical assistance to promote the development of critical minerals value chains in Pakistan.
“The new CPS is tailored to address Pakistan’s structural challenges and promote robust and lasting growth, which benefits the whole 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.
The 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, stated the partnership document.
The lender underlined that Pakistan hosts significant deposits of copper, barite, and chromite alongside other minerals 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.
The ADB will support the expansion of critical minerals opportunities through modernized geodata systems, cofinancing arrangements, and improved regulatory and fiscal frameworks.
According to the CPS, the ADB will also assist the effective establishment and implementation of sovereign wealth funds to ensure fair benefit sharing and enable long-term investments for Pakistan’s sustainable development.
The lender also plans to give $500 million loan to support the reform of Pakistan’s pension and insurance systems and the development of the capital markets to channel long-term savings into productive investments.
The five-year plan will also have allocations for the infrastructure projects. Support for Main Line-I, Pakistan’s primary railway artery, will be a critical programme under the new CPS, stated the ADB.
It said that upgrades to tracks, signalling systems, and stations will transform Main Line-I into a modern and efficient transport route able to help Pakistan fulfil 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 funding arrangement due to Pakistan’s growing indebtedness.
The ADB said that its future financing will also expand to port modernization in addition to the development of national and provincial motorways and highways.
The ADB will deepen its support for trade and logistics by modernizing and integrating supply chains and simplifying and harmonizing cross-border trade procedures.
The ADB along with the World Bank have been extending loans in these areas but the progress often remains below the benchmarks agreed at the time of signing these loan agreements.
The partnership framework document states that Pakistan’s poverty remains elevated at 45% in the last fiscal year, and it is 2.5 times more pervasive in rural areas than in urban ones. 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 disaster risk management decision-making, including through improved information management systems. The ADB will support Pakistan in improving its climate governance, mobilizing climate finance, and scaling up climate investments to advance resilience, adaptation, and mitigation.
The lender emphasised that Pakistan’s production and export bases are narrow, its business environment burdensome, and its public financial management imbalanced. The infrastructure gaps are characterized by an inefficient energy sector, insufficient investments in rail, and deficiencies in urban services.
More than 200 SOEs and state entities owned by the government are valued at the equivalent of 48% of GDP. The ADB said that the heavy footprints of the public sector, a complex regulatory environment, overlapping and conflicting oversight responsibilities, and ineffective accountability mechanisms contribute to persistent governance challenges.
Among the 215 countries and territories assessed, Pakistan earns low scoresnear the bottom quintileacross the Worldwide Governance Indicators, it added.
