The Asian Development Bank (ADB) approved a loan of $300 million on Tuesday for the improvement of Pakistan’s capital markets, enhancement of private investment in the country, and helping mobilization of domestic resources to finance sustainable growth.
The statement said that the second sub-programme of the ADB’s Third Capital Market Development Program is built on institutional and regulatory reforms established under the first sub-program accepted in 2020.
It wishes to accelerate institutional investor demand and surge the range of alternative financial instruments, like derivatives and commodity futures which are accessible to investors.
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“For several years ADB has been Pakistan’s lead development partner in supporting the evolution of its capital markets,” said ADB Director General for Central and West Asia, Yevgeniy Zhukov.
“By making the country’s capital markets more robust and strengthening government debt management, this new programme will also help mobilize more domestic resources which support the government’s efforts to finance sustainable growth and respond effectively to crises,” Director General Yevgeniy Zhukov added.
Moreover, the announcement highlighted that dominance by banks and lack of diversification in Pakistan’s finance sector lead to a high risk of the country not being able to survive financial shocks and days of uncertainty.
In addition, the Pakistan Stock Exchange (PSX) lacks the number of investors which access it and the number of companies making capital, whereas Pakistan’s bond market is almost entirely dominated by government borrowing.
The ADB claimed that the programme supports policy actions that will reinforce market strength and invite investor capital to Pakistan. These comprise structural reforms within the Securities and Exchange Commission of Pakistan (SECP) that will help to improve governance and regulatory capacity.
Besides, the programme also supports actions that will strengthen the government debt market and boost market surveillance systems that aid information exchange. It aims to stimulate a supporting environment to accelerate access to financing for the development of companies and state-owned enterprises.