The Asian Development Bank (ADB) on Friday approved $1.3 billion budgetary support loan for Pakistan, including $1 billion in crisis response facility to shore up low official foreign exchange reserves.
It was for the first time in Pakistan's history that any political or military government availed the crisis response facility to repay its foreign debt and build foreign currency reserves.
Unlike other long-term relatively cheaper ADB loans, the crisis response $1 billion debt has been taken for seven years at an interest rate of London-Interbank Offered Rate plus 2percent, which will bring its total cost to around 4percent.
In addition to that, the ADB also approved $300 million policy loan for the energy sector reforms. Compared to crisis loan facility, the $300 million energy sector reforms loan has been secured at 2percent per annum interest rate that will be paid back in 20 years.
The ADB board of directors, which met in Manila, approved the $1 billion "in immediate budget support to Pakistan to shore up the country's public finances and help strengthen a slowing economy", according to an official handout of the lending agency.