ADB approves $300 million loan for Pak’s capital markets

MANILA/PHILIPPINES: The Asian Development (ADB) on Tuesday approved a $300 million loan to Pakistan to further develop its capital markets, promote private investment in the country, and help to mobilise domestic resources to finance sustainable growth.

According to a statement issued by the ADB, the Pakistan Stock Exchange (PSX) lacks depth in terms of the number of investors which access it and the number of companies raising capital, while Pakistan bond’s market is completely dominated by government borrowing.

The Manilla-based lender further highlighted that Pakistan finance sector is dominated by banks and this lack of diversification increases the risk of the country not being able to withstand financial shocks and periods of uncertainty.

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It is said that the second subprogramme of ADB’s Third Capital Market Development Programme builds on insitutional and regulatory reforms put in place under the first subprogram approved in 2020.

“It aims to catalyse institutional investor demand and increase the range of alternative financial instruments such as derivatives and commodity futures that are available to investors,” it said.

Speaking on the occasion, ADB Director General for Central and West Asia Yevgeniy Zhukov said: “For several years ADB has been  Pakistan’s lead development partner in supporting the evolution of its capital markets.”

“By making the country’s capital markets more robust and strengthening government debt management, this new program will also help to mobilise more domestic resources which supports the government’s efforts to finance sustainable growth and respond effectively to crises.”

ADB’s program support policy actions that will strengthen market stability and attract investor capital to Pakistan. These include structural reforms within the Securities and Exchange Commission of Pakistan (SCEP) that will improve governance and regulatory capacity.

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The ADB further added that it support measures that will strengthen the government debt market and enhance market surveillance systems that facilitate information exchange.

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