ISLAMABAD-Pakistan and Asian Development Bank (ADB) on Wednesday signed loan agreement worth $300 million that was approved by Manila-based lender few days before.

The loan agreement was signed by Noor Ahmed, Secretary the Economic Affairs Division, and Country Director of the ADB. Makhdum Khusro Bakhtyar, Minister for Economic Affairs, witnessed the loan signing of Third Capital Market Development Programme (Subprogramme -1) amounting to USD 300 million between the government of Pakistan and the Asian Development Bank.

Third Capital Market Development Program will facilitate the design and implementation of reforms that are necessary to create an enabling environment for the emergence of competitive capital markets and to achieve greater capacities in size of financial markets. The reforms are guided by three key objectives i.e. stability, diversification and facilitation. The reforms proposed under this programme will lower the cost of financial intermediation and facilitate private sector investment to generate sustainable growth and job opportunities. It will also mitigate the negative impact of capital market instability on the economy and help to diversify Pakistan’s financial system.”

It will also diversify the investor base, develop important market infrastructure such as surveillance systems, and improve the supply of alternative financial instruments. Additionally, the program will help the government to strengthen its debt management proficiency.

Country Director stated that ADB is one of the leading development partners of Pakistan. ADB fully supports the government’s development vision and policies. ADB is providing its support for policy reforms and project financing in the key priority areas such as energy, road, social sector, water & irrigation and urban services. ADB also assured strong commitment to further strengthening and expanding its partnership with Pakistan. ADB is likely to disburse US$ 300 million in next few days as balance of payment support to GoP. This will augment foreign exchange reserve position of the country.

Federal Minster for Economic Affairs deeply appreciated ADB for this support. He highlighted that diversification, deepening and expansion of Pakistan’s capital market was critically important for domestic resource mobilization for development of business and industry, economic development and job creation.

The minister further highlighted the commitment of his government towards transformation of financial sector in terms of diversity, access, inclusiveness and reaching out to underserved areas and segments.

Currently, Pakistan’s capital markets play a limited role in financial intermediation and resource mobilization. The Pakistan Stock Exchange lacks depth in terms of the number of investors and the number of companies raising capital. Fewer than 250,000 individual investors, or less than 0.1% of the population, have a stock investing account, and the Pakistan Stock Exchange lags most of its regional peers on market capitalization as a percentage of gross domestic product. ADB has supported the development of Pakistan’s financial markets through three policy-based loans over the past two decades.