Pakistan is one of the ten developing Asian countries that largely benefitted from the Asian Development Bank’s (ADB) Trade and Supply Chain Finance Program (TSCFP) over the past 18 months.
According to the lender’s latest news release on food security in the region, the program has backed over 1,900 food and agriculture-related imports valued at $2.3 billion to 10 countries in developing Asia, with most assistance going to Bangladesh, Vietnam, and Pakistan.
ADB has boosted its support in the region to ease worsening food shortages in Asia and the Pacific by expanding assistance through its TSCFP to clear bottlenecks in the import of food and agriculture products. To enhance its support, TSCFP has boosted risk limits on trade finance guarantees for food imports by $300 million. When combined with partner commercial bank cofinancing of transactions under the expanded limits, the support can translate into around $500 million of extra finance for food imports in the region.
The additional support will facilitate trade in food and goods such as fertilizers to promote food production, with the new limits allowing ADB to assume extra exposure in transactions with its partner banks to finance the import of these items. The new limits will be reviewed after a year.
“There is a growing food crisis that means more families are going hungry every day in developing countries in Asia,” said TSCFP Head Steven Beck. “Already, a significant share of our trade finance portfolio supports food security. But it’s clear we need to do even more, as high inflation in food prices has eaten into existing global trade finance limits for food imports. The new higher limits enable us and our partner banks to expand trade financing and improve food security in Asia’s developing economies”.
ADB stats suggest food systems are under mounting strain from increased frequency and severity of weather extremes, the impacts of the COVID-19 pandemic, supply chain disruptions, and increasing conflict and insecurity. These factors have triggered rising global food prices as reflected by the Food and Agriculture Organization of the United Nations (FAO) Food Price Index which climbed 54 percent from May 2020 to June 2022.
The expansion of trade finance for food security builds on ADB’s long-term financing for food and agriculture through governments, agribusinesses, and financial intermediaries. In 2021, TSCFP supported 1,411 transactions valued at $1.6 billion in food and agricultural commodities, and 83 transactions valued at $247 million to support fertilizers and food production machinery.
Backed by ADB’s AAA credit rating, TSCFP provides loans and guarantees to more than 200 partner banks to support trade, creating import and export opportunities for enterprises across Asia and the Pacific.
On the flip side, ADB’s recent climate-intensive review suggests rising temperatures, varying patterns of rainfall, and increased and intensified flooding have raised concerns among farmers and those involved in the development of agriculture and food production in Pakistan.
The demand for food and industrial raw materials is rapidly increasing in the South Asian country. The prices of farm inputs such as fertilizers, pesticides, farm machinery, and diesel have also skyrocketed, resulting in high farm production costs and more pressure on the consumer.