ISLAMABAD: The Asian Development Bank (ADB) and the government of Pakistan, on Monday, signed $500 million policy-based loan to support climate change and disaster risk reduction and resilience in the country.
ADB Country Director Emma Fan and Economic Affairs Division (EAD) Secretary Kazim Niaz signed $500 million policy-based loan to support climate change and disaster risk reduction and resilience in Pakistan.
The Climate and Disaster Resilience Enhancement Program will strengthen Pakistan’s institutional capacity for planning, preparedness, and response; increase inclusive investment in disaster risk reduction and climate resilience; and support the scale up of disaster risk financing using a risk-layered approach.
A technical assistance grant of $1 million will support implementation of the programme.
Pakistan is one of the most vulnerable countries to climate change and disasters triggered by natural hazards in Asia and the Pacific. Average losses from disaster events exceed $2 billion per year. Women and other vulnerable groups are disproportionately affected by climate change and disaster events.
“This program builds on ADB’s longstanding work in Pakistan to understand and reduce climate and disaster risks and support effective disaster response,” said the ADB Director General for Central and West Asia, Yevgeniy Zhukov. “We are proud to support an integrated and comprehensive approach to climate and disaster risk management, including a portfolio of disaster risk financing instruments for timely and adequate funding for disaster response.”
The programme supports enhanced capacity for disaster risk mapping and modelling for investment and development decisions. It enhances coordination for disaster monitoring and response. It supports enhanced planning and prioritisation of gender-sensitive and resilient public investments, including integrated flood risk management and nature-based solutions.
The programme supports mobilisation of climate finance from public and private sources. This includes issuance of a domestic green Sukuk (Islamic bond). A key innovation of the programme is the use of ADB’s Contingent Disaster Financing option for the first time in the Central and West Asia region. This will provide quick disbursing budget support in the event of a disaster.
The programme will support the establishment of a solidarity fund to facilitate the uptake of risk transfer solutions such as agriculture insurance. The programme also supports shock-responsive social protection to deliver cash assistance in the event of a disaster.
Official documents revealed that the programme will support the implementation of climate change resilience and disaster risk management reforms. The total programme financing size is $1.0 billion, comprising $500 million for subprogram 1 for fiscal year 2025, and up to another $500 million for a CDF for fiscal year 2026.61 The size of the programme is determined by the government’s development financing needs for FY2025 throughFY2030 and expected future costs of climate change and disaster events.
The government has requested a regular loan of $500 million from ADB’s ordinary capital resources to help finance subprogram 1.63. The loan will have a 15-year term, including a grace period of three years; an interest rate determined in accordance with ADB’s Flexible Loan Product; a commitment charge of 0.15 per cent per year; and such other terms and conditions set forth in the draft loan agreement. Based on the custom-tailored repayment type, the average maturity is 11.95 years, and there is no maturity premium payable to ADB.
The Ministry of Finance is the executing agency and responsible for coordinating and monitoring programme implementation.
Copyright Business Recorder, 2024
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