Pakistan: Third Capital Market Development Program (Subprogram 2)
The program supports the design and implementation of structural reforms necessary to create a competitive capital market and promote private investment in the country and is anchored in an overall government approved Capital Market Development Plan and Vision 2025 government agenda for Pakistan. The program is in line with the Asian Development Bank (ADB) Strategy 2030 and country partnership strategy for Pakistan, 2021 2025. The program will (i) strengthen market stability, (ii) enhance market facilitation, (iii) enhance supply-based measures, and (iv) improve demand-based measures for capital market development. It also fits in the framework of the $6 billion International Monetary Fund (IMF) Extended Fund Facility (EFF) program approved on 3 July 2019 to facilitate improved macroeconomic management. The EFF program includes recommendations for finance sector reforms that focus on deepening access to finance, implementing a sound debt management strategy, and supporting private sector development.
McCartney, Andrew C.
Central and West Asia Department
Request for information
|Project Name||Third Capital Market Development Program (Subprogram 2)|
|Country / Economy||Pakistan
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Gender Equity and Mainstreaming
Governance and capacity development
|Sector / Subsector||
Finance / Finance sector development
|Gender Equity and Mainstreaming||Effective gender mainstreaming|
|Description||The program supports the design and implementation of structural reforms necessary to create a competitive capital market and promote private investment in the country and is anchored in an overall government approved Capital Market Development Plan and Vision 2025 government agenda for Pakistan. The program is in line with the Asian Development Bank (ADB) Strategy 2030 and country partnership strategy for Pakistan, 2021 2025. The program will (i) strengthen market stability, (ii) enhance market facilitation, (iii) enhance supply-based measures, and (iv) improve demand-based measures for capital market development. It also fits in the framework of the $6 billion International Monetary Fund (IMF) Extended Fund Facility (EFF) program approved on 3 July 2019 to facilitate improved macroeconomic management. The EFF program includes recommendations for finance sector reforms that focus on deepening access to finance, implementing a sound debt management strategy, and supporting private sector development. The program also contributes to EFF implementation and sustainability since it develops alternative sources of access to finance (i.e., capital markets), supports sound debt management and government bond market development, and helps mobilize financial resources to private investment.|
|Project Rationale and Linkage to Country/Regional Strategy||The Pakistan economy has started to show signs of recovery, posting a gross domestic product (GDP) growth rate of 3.94% in fiscal year (FY) 2021. The coronavirus disease (COVID-19) pandemic adversely impacted the economy in 2020, prompting a revision of the GDP forecast from a pre-pandemic growth projection of 2.6% to a contraction of 0.5% in FY2020. The government managed the pandemic response by enhancing the disease surveillance and response system, designating health facilities for COVID-19 patients, and initially imposing a partial lockdown in March 2020, which was gradually eased from May 2020 and replaced with localized lockdowns. The Ministry of National Health Services, Regulations, and Coordination also developed the National Deployment and Vaccination Plan with an implementation cost of $1,950 million. As of 28 August 2021, 39.95 million persons had been vaccinated, including 15.27 million fully vaccinated. On the back of this recovery, the government is targeting 4.8% growth in FY2022. To support this, the federal budget for FY2022 includes measures to revive industrial growth and engage the private sector through fiscal and other incentives to support higher economic growth. The budget also introduces tax reforms rationalizing a series of withholding taxes and capital gains tax as well as promoting digital transactions. ADB is satisfied with the direction of macroeconomic conditions and policies, because the government continues to advance the reform agenda in key areas, including central bank autonomy and capital markets, taxation, management of state-owned enterprises (SOEs), and the power sector. Both demand and supply side have contributed to economic growth, and the debt outlook remains stable. However, the economy remains vulnerable, and investment rates have remained very low (an estimated 15.2% of GDP in FY2021). Underdeveloped capital markets have contributed to the ineffective mobilization of savings, leading to a wide saving investment gap. Banks' own credit origination capacity was hampered by ineffective role of Pakistan's capital markets, and the economy remained dependent on volatile foreign capital. The development of domestic capital markets can have the benefit of increasing the government's access to local currency financing by issuing debt through domestic open-market operations and thereby help manage foreign exchange risk and inflation better.|
|Description of Outcome|
|Progress Toward Outcome|
|Description of Project Outputs|
|Status of Implementation Progress (Outputs, Activities, and Issues)|
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
|Responsible ADB Officer||McCartney, Andrew C.|
|Responsible ADB Department||Central and West Asia Department|
|Responsible ADB Division||Public Management, Financial Sector and Trade Division, CWRD|
Ministry of Finance
Q-Block, Finance Division,
Pak Secretariat, Red Zone, Islamabad,
|Concept Clearance||11 Dec 2022|
|Fact Finding||01 Jul 2021 to 29 Jul 2021|
|MRM||20 Sep 2021|
|Approval||22 Mar 2022|
|Last Review Mission||-|
|Last PDS Update||22 Mar 2022|
|Approval||Signing Date||Effectivity Date||Closing|
|22 Mar 2022||25 Mar 2022||25 Mar 2022||30 Jun 2022||-||-|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||300.00||Cumulative Contract Awards|
|ADB||300.00||19 Apr 2022||0.00||0.00||0%|
|Cofinancing||0.00||19 Apr 2022||300.00||0.00||100%|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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|Title||Document Type||Document Date|
|Loan Agreement (Ordinary Operations [Concessional]) for Loan 4176-PAK: Third Capital Market Development Program (Subprogram 2)||Loan Agreement (Ordinary Resources)||Mar 2022|
|Third Capital Market Development Program (Subprogram 2): Report and Recommendation of the President||Reports and Recommendations of the President||Mar 2022|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
None currently available.
Evaluation Documents See also: Independent Evaluation
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$300 Million ADB Loan to Further Develop Pakistan’s Capital MarketsADB today approved a $300 million loan to further develop Pakistan’s capital markets, promote private investment in the country, and help to mobilize domestic resources to finance sustainable growth.
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