ADB Provides Pakistan with $500 Million to Accelerate Economic Transformation

MANILA, PHILIPPINES - The Asian Development Bank (ADB) has approved a $500 million loan to support Pakistan’s efforts to address harm done to poor families and the country’s economy by unprecedented international food and fuel price hikes.

The ADB loan will support ongoing changes in the energy and agriculture sectors, and will help lay the foundation for a radical transformation of the economy by diversifying, deepening and expanding a competitive industrial sector, and creating much-needed jobs for Pakistan’s young and growing labor force.

ADB support comprises a key part of a global financing plan underpinning the government’s economic stabilization program. The stabilization plan includes actions to shore up and manage foreign reserves, improve monetary policy, trim the fiscal deficit and its financing gap, and cut back on government borrowing from the State Bank of Pakistan. The stabilization plan is focused on protecting the poor through special safety net programs, and reassuring financial markets through fiscal and monetary discipline.
“Addressing the impact of fuel and food price increases unleashes immediate benefits to Pakistan’s people and to markets,” said Juan Miranda, Director General of ADB’s Central and West Asia Department. “The fiscal space created by reforms will cut financing gaps, generate conditions for a better deal in the sectors down the road, and provide much-needed cash flow to pay for safety net programs that protect the most vulnerable. ADB’s support balances the need for addressing the needs of Pakistan’s people while reassuring markets that the government is on the right track with its ongoing economic stabilization program.”


The stabilization plan was formulated by the Government, with technical advice from other parties. “ADB financing takes place within the context of this stabilization framework,” added Mr. Miranda. “We are one of several parties contributing to the financing of this plan; others will soon follow with their own financing and programs.”

Pakistan will strengthen the legal and regulatory framework of its financial sector through the ADB program. The State Bank of Pakistan, working closely with the government, has undertaken a series of actions to improve risk management in the sector, strengthen payment systems and protect consumers. This will create stability at a time when international markets are in turmoil. “The measures supported by ADB’s program will benefit ordinary Pakistanis, directly as well as indirectly,” said Mr. Miranda. “Timing is of the essence here.”

ADB is a major financing partner of Pakistan. Its strategy focuses on three areas: infrastructure (roads, irrigation and logistics), utilities (power, energy, urban services) and reforms (including social service provision and finance, public financial resource management, financial sector intermediation and capital markets development).-ADB Media Center

Now that the KSE already lost about 6000 points in just about half year,15000-9144 points despite upper and lower lock strategy being applied recently.This drastic decline in a very short span is obviously associated with a no of national and international events.Meanwhile a no of investors got bankrupt losing billions.Considering the prevailing circumstanses analysts are not hopeful too for market recovery within couple of years to come.

The dollar posted its biggest weekly advance ever against the euro on a surge in demand for U.S. currency funding amid a worldwide credit crunch.

The U.S. currency erased its gain versus the yen on speculation the $700 billion financial bailout approved by Congress today won't be an economic cure-all. The yen dropped against major currencies including the euro and the New Zealand dollar as approval of the rescue encouraged investors to borrow in Japan to buy higher-yielding assets.

Pakistan will strengthen the legal and regulatory framework of its financial sector through the ADB program. The State Bank of Pakistan, working closely with the government, has undertaken a series of actions to improve risk management in the sector, strengthen payment systems and protect consumers. This will create stability at a time when international markets are in turmoil. “The measures supported by ADB’s program will benefit ordinary Pakistanis, directly as well as indirectly,” said Mr. Miranda. “Timing is of the essence here.”

Rupee sinks to record low against dollar


KARACHI ( 2008-10-08 20:35:57 ) :The State Bank of Pakistan said Wednesday it was intervening in the money market after the rupee plunged to a record low against the dollar amid a worsening global financial crisis.

The State Bank of Pakistan said it was injecting capital as the rupee traded at an all-time low of 80.5 rupees to the dollar in the foreign exchange market. It eventually closed at 79.5 rupees.

"Yes, we are intervening in the market (to stabilise the rupee)," State Bank of Pakistan spokesman Syed Waseemuddin told AFP. "I cannot disclose the amount of money involved in this exercise at this point of time."

Market sources put the amount being injected at 100 million dollars.

The rupee has lost 23 percent of its value against the dollar this year, mainly due to economic turmoil, a wave of Islamist militant violence and a fall in Pakistan's foreign exchange reserves.

"There is a huge demand from importers which is putting on extra pressure," Nabeel Iqbal, research manager at Khanani and Kalia forex company, told AFP.

"The thing most needed is to restore the confidence of foreign investors to improve the supply of dollars in the system," he said.

Pakistan's fast depleting foreign exchange reserves fell to 8.135 billion dollars from 9.129 billion dollars on September 4, putting it at risk of defaulting on foreign loans.

The reserves are sufficient to meet just two months of imports, economic expert Rauf Nizamani said, adding that he hoped donors and friends of Pakistan would help the country avert a looming default.

But help could be in short supply given the crisis gripping the global financial system and desperate efforts by governments around the world to shore up failing banks and markets.

The governor of the Pakistan State Bank, Shamshad Akhtar, said in a statement late Tuesday that Pakistan's banks are able to withstand the global crisis and there is no risk to people's savings.

Banks in Pakistan largely focus on conventional lending and are not exposed to the US subprime mortgages that sparked the current turmoil, Akhtar said.

"There should not be any cause for concern about the stability of the banking system in the coming days," said Akhtar, the first female head of Pakistan's state bank.

But she appealed to Pakistanis to "cooperate" by not panicking and withdrawing their savings from banks.

"(The) public at large should cooperate and should help in channeling liquidity within the formal system," Akhtar said.

The State Bank of Pakistan had injected around 500 million dollars in capital since 2006 to ensure the flow of capital, she said.


Copyright AFP (Agence France-Presse), 2008

India - FOREX reserves in 2007, December - 272 billion $$US
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India - FOREX reserves in 2008, July - 308 billion $$US
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India's increase in FOREX over the last 8 months = + 12%

Pakistan - FOREX reserves in 2007, December- 16.03 billion $$US
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Pakistan - FOREX reserves in 2008, August - 10.487 billion $$US
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Pakistan's decrease in FOREX over the last 8 months = - 35%

Why does India's foreign exchange reserves rise by 12% over the same period, as Pakistan's foreign exchange reserves fall by 35%?

according to STATE BANK OF PAKISTAN the data of countrys foreign debts and liabilities which was 45.9 billion dollars in MARCH2008 will also increase further due to depreciation of rupee...though it was 40.5 billion dollars on 30 june 2007 however economists believe that bc of this v fact our country would hv 2 resort to borrowing from INTERNATIONAL FINANCIAL INSTITUTIONS as IMF....

it z observd that increasing prices of pulses,edioble oil and wheat hv disturbd the budget of a common man and sch a recent devaluation will put further burden on his pocket...it will add to inflation,which z already here in double digit. According to Chairman of the karachi wholesale Grocers Association, ther will b further increase in the prices of food items,which r already v high,jst bc of rupee's devaluation.

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