The Asian Development Bank (ADB) has approved a US$300mn loan to Pakistan to support macroeconomic stability through trade facilitation and export diversification.

The facility will help Pakistan recover its current account deficit in a “sustained manner”, reveals a statement by the ADB.

It will introduce tariff and tax-related policy reforms to improve Pakistan’s trade competitiveness and strengthen key institutions, including accreditation bodies, the Export-Import Bank of Pakistan, and the Pakistan Single Window, a digital system that allows those involved in trade and transport to lodge standardised information and documents to fulfil import, export and transit-related regulatory requirements.

The new financing forms the second phase of a trade and competitiveness programme for Pakistan by the ADB.

During the first stage, the ADB helped the government bring in key reforms, including reducing or abolishing tariffs and ad hoc duties on a variety of raw materials and intermediate goods.

Several steps were also taken to introduce e-commerce, support institutions involved in facilitating trade and enhance the export certification process.

Since 2004, Pakistan has experienced a volatile pattern of export growth that reflects underperformance and a long-term decline in competitiveness of its export industry, says the ADB. This has only been made worse by Covid-19, which has served to reduce higher-income countries’ demand for manufactured goods and disrupted the supply of raw materials from the country.

“While Covid-19 hit Pakistan at a critical point in its macroeconomic recovery, the government’s ongoing efforts to ensure stability have started showing encouraging results this fiscal year,” says ADB principal public management specialist Hiranya Mukhopadhyay. “ADB’s programme will support these efforts and help Pakistan to improve its export competitiveness – now more important than ever given the impacts of the pandemic.”

In September, the ADB approved another US$300mn loan to help strengthen Pakistan’s finance sector by supporting measures to develop competitive capital markets and encourage private sector investment in the country.

Elsewhere, under its Rapid Financing Instrument, the International Monetary Fund (IMF) approved the disbursement of a US$1.4bn loan to Pakistan in April to meet the balance of payment needs stemming from the outbreak of the pandemic.