$500m AIIB loan to mitigate Covid-19 impact

Updated May 27 2020

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Under the financing plan for the programme, the AIIB will provide $500m, while the ADB loan will amount to $500m. — AFP/File
Under the financing plan for the programme, the AIIB will provide $500m, while the ADB loan will amount to $500m. — AFP/File

ISLAMABAD: The Asian Infrastructure Investment Bank (AIIB) will provide budgetary support worth $500 million to Pakistan to mitigate the significant negative economic and social impacts caused by Covid-19, it was learnt here on Tuesday.

Supported under the ‘Covid-19 Crisis Recovery Facility’, the AIIB loan for the government’s health sector and counter-cyclical development expenditure programme will be co-financed by the Asian Development Bank (ADB) to effectively manage the coronavirus outbreak and reduce its immediate social and economic damages.

Under the financing plan for the programme, the AIIB will provide $500m, while the ADB loan will amount to $500m. The estimated loan closing date has been set for December 2021.

A report of the AIIB on the proposed loan said Covid-19 has significantly impacted Pakistan’s ability to continue with the ongoing economic recovery programme initiative and sustain high and inclusive growth.

The ADB estimates that both exports and remittances will decline by $2 billion during the fiscal year ending June 2020. Total revenue is expected to decline by almost $6bn and will contribute maximum to Pakistan higher fiscal deficit of two per cent during the fiscal year 2020. These impacts have already led to significant job losses — both in formal and informal sectors.

The AIIB says the government has acted quickly to approve a health sector and counter-cyclical development expenditure programme package of $7.2bn which consists of three broad areas to support: health, social safety net and economic stimulus measures.

Additionally, the government has also approved a comprehensive Covid-19 Strategic Preparedness and Response Plan including $595m in financing for priority activities. These expenditure allocations contain specific strategies for protecting the poor and vulnerable, including women; augmenting the health sector capacity and supplies; and protecting productive sectors and small businesses from economic downturn.

AIIB’s financing under the ‘Covid-19 Active Response and Expenditure Support’ programme is provided through general budgetary support for the purpose of meeting gaps in Pakistan’s development financing needs.

Under this programme, it has been anticipated that the government, by December 2020, would import 10,000 additional ventilators and additional 10,000 Covid-19 protective kits for medical staff. The health ministry would establish centralised and age- and sex-disaggregated online coronavirus data base management system and one for each province.

The government would disburse cash assistance totaling $1.20bn to 3m daily wagers, of which at least 23pc are women. The government would disburse $0.44bn cash grants among 12m families under the ‘Kafalat Programme’, of which 4.5m would be new families added under the Benazir Income Support Programme.

Under the financial inclusion strategy, at least 6m female beneficiaries have the bank account. At least 25pc beneficiaries of the loan under the ‘Kamyab Jawan Programme’ are women entrepreneurs. The Federal Board Revenue would release pending Rs75bn tax refunds, and the State Bank of Pakistan would reduce the capital conversion buffer to 1.5pc to increase the size of loanable funds.

Published in Dawn, May 27th, 2020