Days after Finance Minister Shamshad Akhtar declared public debt as “unsustainable”, Pakistan secured an expensive $300 million loan at market rates from the Asian Development Bank to improve tax compliance, showing a glaring contrast between the government’s actions and words.
The loan has not been obtained for development purposes; instead, the proceeds would be utilised for budget financing to bring reforms to Pakistan’s revenue and expenditure frameworks.
On Wednesday, the Manila-based lending agency approved a $659 million financing package for Pakistan under three different loans. These include $300 million for improving domestic resource mobilisation, $275 million for rehabilitating schools damaged by the devastating August 2022 floods, and $80 million for enhancing agricultural productivity to improve food security, according to an announcement by the ADB on Wednesday.
The ADB announcement came as the World Bank’s Debt Management and Sustainability Mission met with the finance minister to review the country’s debt management.
Last week, Dr Akhtar announced that Pakistan’s debt burden has become “unsustainable” — a notion that World Bank’s Vice President for South Asia Martin Raiser disagreed with. In an interview, Raiser described the country’s debt as “sustainable”.
The ADB is already paying the salaries of half of Pakistan’s Debt Management Office staff, which the finance ministry should ideally pay.
