The Asian Development Bank (AfDB) on Monday approved a loan of $ 300 million to help strengthen Pakistan’s ailing financial sector.
The new loan, according to a bank official, will be used to support measures to develop competitive capital markets and encourage private sector investment in the country.
“The reforms proposed under this program will reduce the cost of financial intermediation and facilitate private sector investments to generate sustainable growth and employment opportunities,” said Sana Masood, senior project manager at the bank. .
“It will also alleviate the negative impact of the instability of the capital market on the economy and help diversify Pakistan’s financial system,” Masood said in a statement.
Currently, Pakistan’s financial markets play a limited role in financial intermediation and resource mobilization.
The Pakistan Stock Exchange, she added, lacks depth in terms of the number of investors and the number of companies raising capital.
Fewer than 250,000 individual investors, or less than 0.1% of the population, she continued, have an equity investment account, and PSX lags most of its regional peers on the market capitalization as a percentage of gross domestic product.
The AfDB has supported the development of Pakistani financial markets through three policy-based loans over the past two decades.
Islamabad and the bank agreed to anchor the program in designing a long-term national capital market master plan to strengthen government ownership and interagency coordination.
The bank will also provide technical assistance of $ 800,000 to support the implementation of the main reform actions under the program.
In June, the AfDB and the World Bank each loaned cash-strapped Pakistan $ 500 million to support its struggling economy which has been hit by global coronavirus restrictions.
On May 19, the AfDB approved a separate emergency assistance loan of $ 300 million to strengthen Pakistan’s public health response to Covid-19 and help meet the basic needs of vulnerable and poor segments of society. .
Established in 1966, the Manila-based lending agency is owned by 68 members, including 49 from the region.