ADB to Provide Technical Assistance to Promote Transparency in Pakistan’s Borrowing Practices

Pakistan excessively relies on external borrowing, increasing its vulnerability to exchange rate depreciation and financial stability. The high levels of debt are associated with a shift towards less transparent, more expensive, and riskier sources of financing, decreasing debt sustainability across the region. Keeping a check on borrowing costs is critical for efficient debt management and transparency since it maintains debt sustainability, contains fiscal risks, and ensures that public debt does not swallow up essential spending or jeopardise development gains.                                                                                                               

In this context, Asian Development Bank (ADB) effectively provided financial support to Pakistan and other developing countries during the pandemic to promote sustainability against heightened fiscal risks that stemmed from a protracted economic downturn or volatile global financial conditions. Recently, ADB has decided to provide technical assistants to improve Debt sustainability and transparency in Pakistan. The financing amount of the TA subproject is around $0.9 million, which will be used to upgrade Pakistan’s debt-borrowing practices. In this project, the Government of Pakistan will provide counter support like delivering counterpart staff, office accommodation and supplies, domestic transportation, secretarial assistance and other in-kind contributions.

To increase sustainability and transparency in Pakistan’s debt management, the Technical Assistance will build on three interrelated outputs: (i) implementation of the Sustainable Development Finance Policy (SDFP), (ii) fiscal risk management practices strengthened, and (iii) public debt recording, management and reporting strengthened. Aligning with the SDFP principles of the International Development Association (IDA) will strengthen ADB’s support for debt sustainability. In SDFP, there is a debt sustainability enhancement program pillar, creating additional incentives for countries to move toward sustainable development financing.

It is expected that all these efforts will help mitigate the adverse effects of debt accumulation by improving macro-fiscal policy frameworks and strengthening domestic resource mobilisation, more efficient spending of scarce fiscal resources through improved public financial management systems, and strengthened institutional capacity for debt management.