ADB approves $500m loan to bolster Pakistan’s disaster resilience

ISLAMABAD: The Asian Development Bank (ADB) has approved contingent disaster financing (CDF) facilities totalling $500 million under its policy-based lending to help Pakistan withstand and respond to natural disasters.

The facilities will provide prompt budget support following eligible disaster events, helping the country reduce their economic and fiscal impacts.

Floods, earthquakes and other disasters cause Pakistan estimated annual average losses of $2 billion.

The 2022 floods alone resulted in $14.9 billion in direct damage and $15.2 billion in economic losses, pushing as many as 9.1 million people into poverty.

Poor and rural communities have less capacity to recover from such disasters, while women and girls are disproportionately affected.

To help protect communities and reduce the impact of future disasters, the second subprogramme of the Climate and Disaster Resilience Enhancement Programme support reforms aimed at strengthening disaster preparedness and risk management.

It also seeks to integrate resilience measures into Pakistan’s development planning and investment, strengthen the country’s disaster risk financing framework and improve the availability of funds following disaster events.

“When disaster strikes, it is often the most vulnerable communities that are hit hardest. Investing in preparedness can help protect lives and livelihoods, reduce economic losses, and safeguard the development gains Pakistan has worked hard to achieve,” ADB Country Director for Pakistan Emma Fan said.

She said the programme would support the country in implementing critical reforms to ensure a more resilient future.

The programme is aligned with Pakistan’s priorities for managing disaster risks and the ADB’s commitment to supporting resilience initiatives across Asia and the Pacific.

Pakistan narrowly avoided a sovereign default in 2023 amid dwindling foreign exchange reserves, mounting external payment pressures and a severe balance-of-payments crisis.

The country secured a $3 billion International Monetary Fund (IMF) Stand-By Arrangement in June 2023, which helped stabilise its economy and avert an immediate default.

ADB’s financial-sector support

In a separate initiative, the ADB approved a $700 million policy-based loan for Pakistan in June to strengthen its financial sector and introduce reforms in the insurance industry.

The package, approved on June 18, includes $250 million in concessional financing under the first subprogramme of the Insurance Transformation Programme.

The programme aims to support the Securities and Exchange Commission of Pakistan’s (SECP) five-year roadmap for insurance sector development, lower barriers to entry for new companies, and encourage greater private-sector participation in insuring public assets. It also seeks to strengthen regulatory oversight and consumer protection.