Finance Minister Ishaq Dar announced on Tuesday that the Asian Infrastructure Investment Bank (AIIB) had transferred $500 million to the State Bank of Pakistan (SBP).
“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
Earlier this month, the finance minister had said Pakistan would receive the funds as co-financing for a development programme.
The Building Resilience with Active Countercyclical Expenditures Programme is an Asian Development Bank (ADB) financing programme to counter the social fallouts of economic crisis.
Last month, the ADB signed an agreement with Pakistan to provide a $1.5 billion loan for budgetary support and help flood-related rehabilitation and reconstruction activities.
The loan, provided under the BRACE Programme, was provided to fund the government’s $2.3bn countercyclical development expenditure programme designed to cushion the impacts of external shocks, including the Russian invasion of Ukraine.
The $1.5bn loan was aimed to provide social protection, promote food security, and support employment for people amid devastating floods and global supply chain disruptions.
The State Bank later announced that it had received $1.5bn from the ADB “as disbursement of policy-based loan for the government of Pakistan”.
Early bond repayment
Today’s inflow from AIIB comes amid growing uncertainty about Pakistan’s ability to meet external financing obligations with the country in the midst of an economic crisis and recovering from devastating floods that killed over 1,700 people.
Pakistan’s reserves with the central bank stood at $7.8bn as of November 18, barely enough to cover a month’s imports.
But on Friday, SBP Governor Jameel Ahmad said he expected external financing requirements would be met on time because of inflows from international lenders. He said the country will repay a $1 billion international bond on December 2, three days before its due date.
The bond repayment, which matures on Dec 5, totals $1.08bn, Ahmad told a briefing, according to two analysts who were present.
For this purpose, the governor said funding was lined up from multilateral and bilateral sources, one of which was the $500m from AIIB which Pakistan received today, to ensure the repayment would not affect foreign exchange reserves.