ADB Approves $500 Million Loan For Pakistan to Help Economic Recovery and Deepen Safety Nets for Poor

MANILA, PHILIPPINES (26 June 2009) – The Asian Development Bank’s (ADB’s) Board of Directors has approved two loans to Pakistan totaling $500 million that will assist the government with its macroeconomic stability efforts and fund a targeted safety net program for the poor.

The loan, known as AETP2, is the second subprogram of the Accelerating Economic Transformation Program (AETP). The loans support short- and medium-term reform actions being taken by Pakistan's government in response to the global economic and financial crisis. The loans also carry forward measures enacted by the government in 2008 to cushion the impact of skyrocketing global fuel and food prices.

Under AETP2, a loan of $150 million from ADB's Special Fund will target the Benazir Income Support Program (BISP), a cash transfer program focusing on poor women. Under the scheme, the female head of qualified families receives 1,000 rupees per month to help defray the rising cost of food and other household expenses.

Created in October 2008, the BISP social safety net program is expanding its current coverage of 3.5 million families to 5 million families next year and aims to reach 7 million families by 2011.

An additional $350 million in ADB loans will help Pakistan move to more market-based pricing of wheat and electricity, remove subsidy distortions and improve targeted social safety nets. It will also improve the bankability of the energy sector by resolving long-standing accumulated debt and attracting much needed investment. AETP2 will also help Pakistan strengthen financial intermediation.

"The AETP2 program will benefit millions of poor and vulnerable families through targeted cash allocations, and by removing inadequately targeted subsidies in the wheat and energy sectors, while freeing up much needed funds for development," said Rune Stroem, Country Director of ADB's Pakistan Resident Mission. "These targeted interventions will help enable Pakistan to meet its urgent social and developmental needs in FY2009."

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