Interest Rate on ADB Loan Likely to be Over 3%

The regular loan of $1.25 billion approved by the Asian Development Bank (ADB) for Pakistan will have a 7-year term, including a grace period of 3 years.

The interest rate would be determined in accordance with ADB’s Flexible Loan Product plus 75 basis points and a commitment charge of 0.15 percent per year, official documents revealed. This will likely take the total interest rate to over 3 percent.

ADB recently approved $1.5 billion for “Countercyclical Support Facility Loans Islamic Republic of Pakistan: Building Resilience with Active Countercyclical Expenditures Programme” which include a regular loan of $1.25 billion from ADB’s ordinary capital resources and a concessional loan of $250 million from ADB’s ordinary capital resources to help finance the program.

ADB’s $1.5 billion loan for the program will provide 5.5 percent of the gross external financing needs and support the countercyclical development expenditure programme of $2.3 billion. ADB is also exploring co-financing with other development partners.

The $250 million concessional loan will have a 25-year term, including a grace period of 5 years and an interest rate of 2 percent per year during the grace period and thereafter.

The Ministry of Finance will be the executing agency while the implementing agencies will be the Ministry of Finance, BISP, the Ministry of Industries and Production, the Ministry of National Food Security and Research, and the State Bank of Pakistan (SBP). The program’s implementation period is from 1 July 2022 to 30 June 2023. The loan closing date is 31 December 2023.

The documents further revealed that the government’s budget deficit for the fiscal year 2023 is estimated at $17.6 billion (or 4.9 percent of GDP), while the gross financing needs amount to $84.2 billion.

The external financing is expected to be $27.9 billion, which includes IMF ($3.8 billion), ADB ($2.3 billion), World Bank ($1.9 billion), commercial borrowings and/or bonds ($6.3 billion), and short-term borrowings ($13.3 billion). The balance will be financed from domestic sources.



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