PAKISTAN’S quest for deeper collaboration with the Asian Development Bank underscores both its growing appetite for long-term, low-cost development financing and its reliance on multilateral lenders to shore up a frail economy. Finance Minister Muhammad Aurangzeb’s meeting with ADB president Masato Kanda for greater cooperation across key areas and policy-based lending appears to be as much a pitch for fresh funding from the lender as it is a request for technical support to develop innovative financing instruments to explore international debt markets and raise more funds. The wish-list for financial support from the bank and its collaboration in market-based financing instruments — green bonds, blended finance and debt-for-nature swaps — indicates both ambition and desperation for new funding avenues amid dwindling bilateral official and private flows. However, the real challenge does not lie in mobilising debt but in a long-term commitment to structural, fiscal and governance reform beyond the present IMF funding programme. The painfully slow progress in critical areas such as energy, taxation and SOEs, however, does not inspire much confidence in the government’s commitment to reforms.

That the ADB boss has reaffirmed his support for Pakistan at a time when the two sides are working out details of the 10-year Country Partnership Strategy (2026-35) on the pattern of a similar $20bn World Bank programme is reassuring. However, while this fact does signal the bank’s confidence in Pakistan’s medium-term trajectory, it also underlines Pakistan’s increasing dependence on its multilateral partners to heavily finance its development and keep the economy afloat. There is no doubt that the ADB has played an important role in Pakistan’s economic trajectory over the past decades. But the country’s experience with the bank — or, for that matter, with other multilateral agencies — in recent years shows that, without credible reforms and sound management, such a partnership cannot go very far. Mr Aurangzeb is right to stress the recent hard-won macroeconomic stabilisation: inflation is down, the current account has turned around and international rating upgrades are expected to ease borrowing costs. Yet these gains will remain fragile unless the execution of long-standing productivity and governance reforms is expedited. Not just that, Islamabad also stands to lose the international goodwill it has gained in the past couple of years if it fails to show consistent commitment to sound governance and economic management policies.

Published in Dawn, August 29th, 2025