The Asian Development Bank has pointed out that Pakistan’s economic recovery remains vulnerable to a combination of political instability, persistent security concerns, and exposure to external shocks. In its latest country update, the ADB stressed that these risks could derail growth prospects unless accompanied by firm structural and policy reforms.
The report underlined how longstanding structural weaknesses continue to hamper the implementation of development projects in Pakistan. Inefficient land acquisition processes, frequent procurement delays, and the lack of required counterpart funding from local authorities have all slowed the pace of critical infrastructure and social sector initiatives. Adding to these problems are ongoing currency pressures and price fluctuations, which further complicate planning and execution.
To tackle these hurdles, the ADB emphasised the need for regular tripartite portfolio review meetings that bring together the government, ADB teams, and executing agencies. Such platforms are seen as essential for resolving bottlenecks, improving coordination, and ensuring that projects progress on schedule.
A central concern flagged by the ADB is Pakistan’s low tax-to-GDP ratio, which remains well below regional peers due to a narrow tax base and the dominance of the informal economy. The report pointed out that without continued fiscal consolidation and broad reforms to expand revenues, the country’s financial stability will stay fragile. It highlighted that strengthening the tax system is critical for creating the fiscal space needed to invest in infrastructure, climate resilience, health, and education.
The ADB also called for a series of reforms aimed at restructuring state-owned enterprises, improving the quality of human capital through better healthcare and education, and stepping up climate adaptation measures. Enhancing private sector participation and encouraging exports of higher-value goods are seen as key pathways to creating jobs and building a more competitive economy.
As of December 31, 2024, the ADB had committed around $43.4 billion in loans, grants, and technical support to Pakistan. The bank’s current sovereign portfolio stands at 53 loans and three grants, amounting to $9.13 billion. Over 2024, the ADB supported several important initiatives, including projects focused on climate and disaster resilience, post-flood reconstruction, energy sector improvements, and new public-private partnerships. This included a notable $500 million policy-based loan under the Climate and Disaster Resilience Enhancement Program, designed to strengthen Pakistan’s ability to prepare for and respond to natural disasters.
Additionally, the ADB approved a $400 million concessional loan for the Sindh Emergency Housing Reconstruction Project to help rebuild homes and restore infrastructure damaged by floods. This effort is part of a broader $1.5 billion package the ADB is providing between 2023 and 2025 to help Pakistan recover from the severe floods of 2022.
The bank’s private sector engagements in Pakistan are also gaining traction. By the end of 2024, the ADB’s non-sovereign outstanding balances and undisbursed commitments in Pakistan stood at nearly $235 million, representing about 1.8 percent of its total private sector portfolio. Combined sovereign and non-sovereign disbursements to Pakistan have reached $33.44 billion to date, sourced from the ADB’s ordinary capital, the Asian Development Fund, and special funds.
Looking ahead, the ADB’s upcoming country partnership strategy for 2026-2030 will focus on helping Pakistan tackle its most pressing challenges. This includes investing in climate-smart infrastructure, supporting digital transformation, and strengthening social sectors such as health and education. The strategy aims to back key structural reforms, build resilience against external and domestic shocks, and expand opportunities through public-private partnerships that can drive inclusive economic growth.
Through this multi-pronged approach, the ADB hopes to support Pakistan in overcoming its vulnerabilities and building a more stable foundation for long-term development.