BEIJING, June 18 (INP) The Asian Infrastructure Investment Bank’s (AIIB) Board of Directors has approved a loan of USD500 million for the COVID-19 Active Response and Expenditure Support (CARES) Program to support Pakistan’s efforts to effectively manage the COVID-19 outbreak.
It aimed at reducing its immediate social and economic impacts, says a report published by Gwadar Pro on Thursday.
Pakistan’s ongoing economic recovery and ability to sustain high and inclusive growth have been significantly impacted by the COVID-19 pandemic. According to estimates by the International Monetary Fund (IMF), the country’s remittances will decline by around USD5 billion for FY2020 and FY2021 and export growth is likely to come to a halt due to the fall in external demand.
Total revenue is expected to decline by more than USD6 billion in FY2020, which will contribute to increasing Pakistan’s primary fiscal deficit by about 2 percentage points. These impacts have already led to significant job losses, both in the formal and informal sectors.
AIIB’s financing for CARES, funded under the Bank’s COVID-19 Crisis Recovery Facility (CRF) and co-financed with the Asian Development Bank (ADB), will promote social protection and economic resilience to prevent long-term damage to the productive capacity, including human capital, of Pakistan’s economy.
This policy-based loan is provided through general budgetary support to fill the government’s financing gaps in implementing health, social safety net, and economic stimulus measures.
The funds will support expenditures allocated by the government for protecting the poor and vulnerable, including women, augmenting the health sector capacity and supplies, and protecting productive sectors and small businesses from the economic downturn.
“By supporting industries and vulnerable groups that have been hard hit by COVID-19, this financing will help mitigate the economic shock and social impacts the country is currently facing,” said AIIB Vice President, Investment Operations, Konstantin Limitovskiy.
“Preventing long-term damage to the productive capacity of the economy is essential. AIIB’s joint efforts with the international community are targeting this need.”
While AIIB does not have a regular instrument for policy-based financing, the Bank is extending such financings on an exceptional basis under the CRF to support its members through programs co-financed with the World Bank or the ADB.
The CRF, created as part of the coordinated international response to counter the COVID-19 crisis, has an initial size of USD5-10 billion to support AIIB members’ urgent economic, financial, and public health financing needs and quick recovery from the crisis. AIIB is currently reviewing additional projects from its clients, the report added quoting AIIB’s official Website.