The Asian Development Bank (ADB) has approved contingent disaster financing facilities totalling $500 million for Pakistan. The support falls under the bank’s policy-based lending and is meant to help the country withstand and respond to natural disasters. Once eligible disaster events occur, the facilities will release budget support promptly, easing their economic and fiscal toll.
The bank said floods, earthquakes and other hazards cost Pakistan an estimated $2 billion a year on average. The 2022 floods alone caused $14.9 billion in direct damage and $15.2 billion in economic losses. The same disaster pushed as many as 9.1 million people into poverty, according to the figures cited in the announcement.
Reforms aimed at preparedness and disaster risk financing
The second subprogramme of the Climate and Disaster Resilience Enhancement Programme will back reforms to improve disaster preparedness and risk management. It also aims to build resilience into Pakistan’s development planning and investment. In addition, it seeks to strengthen the country’s disaster risk financing framework and make funds more readily available after disasters.
Poor and rural communities have less capacity to recover, and women and girls are disproportionately affected, the announcement noted. Emma Fan, ADB Country Director for Pakistan, said: “it is often the most vulnerable communities that are hit hardest.” She added that investing in preparedness could protect lives, livelihoods and past development gains.
Separate $700 million loan targets insurance and finance sector
Pakistan narrowly avoided a sovereign default in 2023 amid dwindling foreign exchange reserves and severe balance-of-payments pressure. It secured a $3 billion International Monetary Fund (IMF) Stand-By Arrangement in June 2023, which helped stabilise the economy. Separately, the ADB approved a $700 million policy-based loan in June to strengthen the financial sector and introduce insurance reforms.
The package, approved on June 18, includes $250 million in concessional financing under the first subprogramme of the Insurance Transformation Programme. It supports the Securities and Exchange Commission of Pakistan’s five-year roadmap for insurance sector development. The programme also aims to lower barriers to entry for new companies, encourage private insurers to cover public assets, and strengthen regulatory oversight and consumer protection.
