ADB to provide $10bn in financing to Pakistan under new 5-year strategy

2026-03-18 - 11:41

ISLAMABAD: The Asian Development Bank (ADB) is expected to extend about $10 billion in financing to Pakistan over the next five years under its 2026-30 Country Partnership Strategy (CPS2026-30) launched on Wednesday. The CPS sets out “a roadmap to support the country’s transition to sustainable and inclusive growth through private sector-led development”, the Manila-based lending agency said. “The five-year strategy will focus on three pathways: enabling private sector development, advancing inclusion and empowerment, and enhancing resilience and sustainability”, it said, adding these priorities will be reinforced by crosscutting themes of good governance and institutional strengthening, gender equality and social inclusion, digital transformation, and regional cooperation and integration. “The new CPS is tailored to address Pakistan’s structural challenges and promote robust and lasting growth, which benefits the whole country, especially the poor and vulnerable,” said ADB Country Director for Pakistan Emma Fan. “It promotes strategic investments and reforms across key sectors to stimulate economic growth and create jobs. ADB looks forward to supporting Pakistan’s public and private sectors in delivering on this ambitious agenda,” she said. The CPS noted that Pakistan had stabilised its macroeconomic conditions following a series of external shocks and had initiated important structural reforms. “The CPS responds to this evolving country context by emphasising export- and investment-led growth, supported by improved public financial management, an enabling business environment, and investments in high-impact sectors”. Private sector development is a central feature of the strategy. Under the CPS, ADB will support reforms and investments to reduce regulatory and compliance burdens, improve infrastructure, expand access to finance, promote public–private partnerships, and boost private sector operations. The CPS also identifies transformative opportunities in critical minerals, railways and multimodal connectivity, energy security and clean energy, agricultural productivity and value chains, integrated water resource management, and skills development and employment. The ADB, which remains one of the top two multilateral lending agencies to Pakistan, said it will increasingly deploy integrated solutions, combining policy reforms, sovereign and non-sovereign financing, technical assistance, and knowledge support across Pakistan to effectively address emerging challenges. To advance inclusion and empowerment, the ADB will prioritise investments and reforms to strengthen human capital, expand access to quality social services, and promote women’s economic participation. With Pakistan’s high vulnerability to extreme weather events and disasters, resilience and sustainability form a core pillar of the strategy. ADB will support initiatives on disaster risk management, climate change adaptation and mitigation, integrated flood and water resource management, agriculture value chains and food security, and air quality improvement. The ADB noted that being the the world’s fifth most populous country, with an estimated population of 240.5 million in 2025, and about 66 per cent under the age of 30, Pakistan’s sizeable young workforce — combined with the country’s rich natural resource endowments, including critical minerals, a growing digital ecosystem, and its strategic location — represented important opportunities for economic growth. A decisive shift toward private sector-driven growth can unlock this potential, transforming the economy and enabling sustained export- and investment-led expansion. However, for Pakistan to shift to a sustainable and inclusive growth trajectory, it must address multiple structural constraints to address critical challenges, which include Pakistan’s narrow production and export bases, its burdensome business environment, and its imbalanced public financial management. “The infrastructure gaps are characterised by an inefficient energy sector, insufficient investments in rail, and deficiencies in urban services. Limited provision of social services and governance weaknesses have weighed on human capital development. Poverty levels remain high”, the ADB said in its CPS, adding that the country was “highly vulnerable to climate change and natural hazards”. These interlinked constraints call for carefully sequenced reforms and well-designed investments to unlock sustained growth while enhancing inclusion and resilience. Yet it said there were a lot of opportunities for sustainable and inclusive growth. With its large young workforce, improving macroeconomic conditions, an ongoing boom in digital innovation, rich agricultural and natural resources, and progress on structural reforms, Pakistan has an opportunity to transform its economy. Highlighting abundant resources and latent development potential, the ADB said about 47pc of Pakistan’s land is arable, compared with 10.7pc globally and 12.7pc in Asia. The country is also richly endowed in critical minerals. Information technology is already Pakistan’s fastest-growing export, and digital transformation can accelerate productivity, stimulate innovation, and create new business opportunities. Moreover, Pakistan is strategically located and strengthening its infrastructure and connectivity can leverage the benefits of regional connectivity indicators. To fulfil its potential and turn its advantages into long-term development gains, Pakistan must carry out lasting reforms and combine these with sound investments. Noting improving economic performance, the ADB said Pakistan’s economy has stabilised and returned to growth following a series of boom-and-bust cycles as GDP expanded by 3.1pc in FY2025, improving from a 0.2pc contraction in FY2023. Average inflation declined sharply to 4.5pc in FY2025 from 23.4pc in FY2024 and fell below the State Bank of Pakistan’s target of 5–7pc. The current account balance moved from a deficit of –4.7pc of GDP in FY2022 to a 0.5pc surplus in FY2025 — the first since FY2011.