A worker walks past the interior of the Asian Development Bank (ADB) headquarters in Manila. PHOTO: REUTERS
ISLAMABAD:
The Asian Development Bank unanimously approved a five-year indicative lending strategy of between $10 billion and $12 billion, which includes allocations to finance critical mineral exploration and the dilapidated Pakistan Railways Main Line I project.
The Indian CEO also supported the strategy at the ADB board meeting, although he made certain comments on Pakistan’s governance and debt-related issues.
The ADB on Wednesday launched a new National Partnership Strategy (CPS) for Pakistan, 2026-2030, setting out a roadmap to support the country’s transition towards sustainable and inclusive growth through private sector-led development, according to the Manila-based lender’s local office.
The lender said the five-year strategy will focus on three avenues: enabling private sector development, promoting inclusion and empowerment, and improving resilience and sustainability.
The ADB did not formally indicate the size of the financing package. But multilateral and government officials said that based on current annual approvals, the indicative size is between $10 billion and $12 billion over a five-year period.
Pakistan and the ADB would negotiate the individual projects against the overall package over a period of five years.
They said the size can increase further if Pakistan’s credit rating is improved. All three credit rating agencies recently upgraded Pakistan, but even the new ratings are not enough to guarantee cheaper long-term loans in the debt markets.
Pakistan currently has an average of $2 billion in new loans from the ADB, half of which is concessional financing. Last year, the ADB approved record loans of $2.6 billion for Pakistan.
Under the approved EAP, ADB will expand financing, policy support and technical assistance to promote the development of critical minerals value chains in Pakistan.
“The new EAP is designed to address Pakistan’s structural challenges and promote strong, lasting growth, benefiting the entire country, especially the poor and vulnerable,” said ADB Country Director for Pakistan Emma Fan.
“It promotes strategic investments and reforms in key sectors to stimulate economic growth and create jobs. ADB looks forward to supporting Pakistan’s public and private sectors to deliver on this ambitious agenda,” he 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, the partnership document states.
The lender highlighted that Pakistan is home to significant deposits of copper, barite and chromite, along with other minerals such as gold, salt and marble. Despite its mineral endowments, mining and quarrying contribute only about 2.4% to Pakistan’s GDP and employ only about 0.2% of the workforce.
Mineral exports are modest. The gap between the economic potential and contribution of the mining sector reflects systemic challenges in infrastructure, governance and regulatory frameworks.
The ADB will support the expansion of critical mineral opportunities through modernized geodata systems, co-financing agreements, and improved regulatory and fiscal frameworks.
According to the CPS, the ADB will also help in the effective establishment and implementation of sovereign wealth funds to ensure fair distribution of benefits and enable long-term investments for the sustainable development of Pakistan.
The lender also plans to provide a $500 million loan to support the reform of Pakistan’s pension and insurance systems and the development of capital markets to channel long-term savings into productive investments.
The five-year plan will also include allocations for infrastructure projects. Support for Main Line I, Pakistan’s main railway artery, will be a key program in the new CPS, the ADB said.
He said improvements to tracks, signaling systems and stations will transform Main Line I into a modern and efficient transport route capable of helping Pakistan fulfill its growing role in regional integration.
Initially, Beijing had decided to fund the Main Line-I project as part of the China-Pakistan Economic Corridor initiative. Later, China decided to withdraw the bilateral financing agreement due to Pakistan’s increasing indebtedness.
The ADB said its future funding will also be expanded to port modernization in addition to the development of national and provincial highways 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 together with the World Bank have been providing loans in these areas, but progress often remains below the benchmarks agreed upon at the time these loan agreements were signed.
The partnership framework document states that Pakistan’s poverty remains high, at 45% in the last fiscal year, and is 2.5 times more widespread in rural areas than in urban areas. The richest 10% of households earn 42% of the country’s income, and the poorest 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 to improve its climate governance, mobilize climate finance and increase climate investments to promote resilience, adaptation and mitigation.
The lender emphasized that Pakistan’s production and export bases are narrow, its business environment onerous and its public financial management unbalanced. Infrastructure gaps are characterized by an inefficient energy sector, insufficient investments in railways and deficiencies in urban services.
More than 200 state-owned companies and government-owned state entities are valued at the equivalent of 48% of GDP. The ADB said that strong public sector footprints, a complex regulatory environment, overlapping and contradictory supervisory responsibilities and ineffective accountability mechanisms contribute to persistent governance challenges.
Among the 215 countries and territories assessed, Pakistan scores low, near the bottom quintile, in the Global Governance Indicators, it added.
