AfDB approves $300 million loan for Pakistan’s capital market growth

In a decision announced on Tuesday, the Asian Development Bank (ADB) approved a $300 million loan to help Pakistan further improve its capital markets and attract private investment to the country.

As noted in an AfDB statement, the latest financing is part of the second sub-program of the AfDB’s Third Capital Market Development Initiative, and it aims to catalyze demand from institutional investors while expanding the range of alternative financial instruments available to investors, such as derivatives and commodity futures.

“For several years, the Asian Development Bank has been Pakistan’s main development partner in developing the country’s capital markets,” said Yevgeniy Zhukov, AfDB Managing Director for Central and West Asia.

By strengthening the country’s financial markets and improving public debt management, this new initiative will also help mobilize additional domestic resources, which will support the government’s attempts to finance sustainable growth while responding effectively to crises.

According to the Asian Development Bank, the program’s support will help stabilize the market and encourage foreign investment in Pakistan.

Structural improvements within the Securities and Exchange Commission of Pakistan (SECP) are among the measures being considered to increase governance and regulatory capacity. In a statement, the organization said it “supports initiatives that would strengthen the public debt market and improve market surveillance systems that enable the exchange of information.”

According to the Asian Development Bank, Pakistan’s financial sector, dominated by banks, lacks diversification, which increases the likelihood that the country will not be able to withstand financial shocks and periods of instability in the years to come. .

He added that the Pakistani stock markets, which are dominated by the Pakistan Stock Exchange (PSX), lack depth in terms of the number of investors accessing them and the number of companies raising capital, while the market The country’s bond market is almost entirely dominated by borrowing from the federal government.

“These reforms will contribute to the mobilization of financial resources for productive investment, in particular by the private sector, as well as the facilitation of economic growth through the development of bond and equity capital markets,” said Sana Masood. , economist at Asian Development. Bank.

This is expected to help reduce the cost of financial intermediation while helping to stabilize systemic vulnerabilities in the bank-dominated financial system.

Shixin Chen, vice president of the Asian Development Bank, recently returned from a five-day visit to Pakistan, during which he met with Prime Minister Imran Khan, key ministers and other senior officials.

Several official sources present at these high-level engagements told Business Recorder that the Asian Development Bank (ADB) plans to provide financial support amounting to $8.7 billion over the next three years.

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