Pakistan receives $500m from AIIB

Finance Minister Ishaq Dar declared on Tuesday that the State Bank of Pakistan had received $500 million from the Asian Infrastructure Investment Bank (AIIB).

“AIIB has transferred today, as per their board’s approval, to State Bank of Pakistan/Government of Pakistan $500 million as programme financing,” the minister said on Twitter.

The finance minister had earlier this month stated that Pakistan would receive the money as co-financing for a development program. To combat the social effects of the economic crisis, the Asian Development Bank (ADB) has funded the Building Resilience through Active Countercyclical Expenditures Programme.

An agreement between the ADB and Pakistan was inked last month to offer a $1.5 billion loan for budgetary support as well as assistance with flood-related repair and reconstruction efforts. The government’s $2.3 billion countercyclical development spending program, created to lessen the effects of external shocks like the Russian invasion of Ukraine, was funded in part by a loan issued under the BRACE Program.

The $1.5 billion loan was intended to boost employment for individuals in the midst of disastrous floods and interruptions to the global supply chain while also promoting food security and social protection. In a later statement, the State Bank stated that it had received $1.5 billion from the ADB “as disbursement of policy-based loan for the government of Pakistan.”

The raise from AIIB today comes as there is rising concern about Pakistan’s capacity to satisfy its requirements for external finance, given that it is going through an economic crisis and is still recuperating from severe floods that claimed more than 1,700 lives. As of November 18, Pakistan’s reserves at the central bank were just $7.8 billion, which is hardly enough to pay one month’s worth of imports.

However, SBP Governor Jameel Ahmad stated on Friday that he anticipated external finance needs to be met on schedule due to inflows from foreign lenders. He declared that on December 2, three days ahead of schedule, the nation will pay back a $1 billion international bond.

According to eyewitnesses, Ahmad stated that the bond repayment, which is due on December 5, is $1.08 billion. The governor stated that funds had been secured for this purpose from bilateral and multilateral sources, one of which was the $500 million from the AIIB that Pakistan received today. This was done to ensure that the repayment would not have an impact on foreign exchange reserves.