Daily Times

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 into the nation.

As stated in an ADB statement, the latest funding is part of the second sub-program of the ADB’s Third Capital Market Development initiative, and it aims to catalyze institutional investor demand while also 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 primary development partner in the development of the country’s capital markets,” said Yevgeniy Zhukov, the ADB’s Director General for Central and West Asia.

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

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

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

According to the Asian Development Bank, Pakistan’s finance industry, which is dominated by banks, lacks diversification, increasing the likelihood that the country would not be able to sustain financial shocks and periods of instability in the coming years.

It went on to say that Pakistan’s equity markets, which are dominated by the Pakistan Stock Exchange (PSX), lack depth in terms of the number of investors who have access to them and the number of companies raising capital, while the country’s bond market is almost entirely dominated by borrowing from the federal government.

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

It is anticipated that this will help to lower the cost of financial intermediation while also helping to stabilize systemic vulnerabilities in the bank-dominated finance 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, important cabinet ministers, and other senior officials.

Several official sources who were in attendance at these high-level engagements told Business Recorder that the Asian Development Bank (ADB) is planning to provide financial support in the amount of $8.7 billion over the next three years.