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ADB Signs Agreements with 5 Pakistan Banks to Support Trade, Economic Recovery

15 May 2009

MANILA, PHILIPPINES – ADB today signed trade-financing agreements with five Pakistan banks, a move that should bolster export and import activities and improve the health of the South Asian nation's economy.

Pakistan approached the International Monetary Fund for an emergency loan in late 2008 after its foreign exchange reserves shrank sharply.

Trade finance around the world has dried up as banks seek to bolster their own capital ratios and, accordingly, have shied away from lending to even the better international and domestic borrowers.

"It's essential that lenders like ADB work to support Pakistan businesses at this particularly challenging time for the Pakistan and the global economy," says Philip Erquiaga, Director General, ADB's Private Sector Operations Department.

ADB signed trade finance agreements with Allied Bank Limited, Bank AL Habib Limited, Habib Bank Limited, Meezan Bank Limited, and National Bank of Pakistan.

The agreements are part of ADB's Trade Finance Facilitation Program (TFFP). In response to the global economic crisis, ADB recently expanded the program to US$1 billion from the previous $150 million. Since many trade transactions can be rolled over at least once per year and since risk-sharing draws in private sector resources, the expanded program is expected to create around $15 billion in trade financing up to the end of 2013.

"Unlike other trade financing arrangements, the TFFP can provide support to both private sector firms and state-owned enterprises. That means the trade support made possible by the new agreements should span all sectors of the Pakistan economy," says Rune Stroem, Country Director of ADB's Pakistan Resident Mission. "We expect some portion of the financing to be directed towards supporting oil imports, which are critical inputs to Pakistan's exports and critical to the economy as a whole."

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