Pakistan: Economic Stabilization Program

Lesson Report:

Pakistan: Economic Stabilization Program

Self Evaluation

A holistic, consultative approach to program design and formulation leads to more effective diagnostics and the development of a strong, relevant, and achievable policy matrix.

This special policy-based loan (SPBL) was developed in close consultation with the government and development partners, including the International Monetary Bank and the World Bank, and was designed through a holistic approach. The experience demonstrated that a comprehensive and holistic consultation process can ensure effective diagnosis of the issues, leading to a strong, relevant policy matrix that prioritizes reform measures and sets realistic timelines in collaboration with the development partners.

Project Cycle Stage

Successful implementation of a reform agenda requires strong government ownership and a host of other factors.

Many public resource reforms, especially those relating to taxes or concessions as in the SPBL, have political and economic implications and are often difficult to undertake without strong ownership. The SPBL implementation success is attributable to (i) a good understanding of the vested interests, (ii) the institutional capacity of government agencies, (iii) effective partnership and coordination between ADB and the government, and (iv) a strong sense of appreciation for the overall benefits of the program.

Project Cycle Stage

At program preparation, Pakistan was confronted with a rapidly expanding fiscal deficit and public debt, a large balance of payments gap, and critically low foreign exchange reserves that threatened not only to compromise economic prosperity but could also lead to macroeconomic instability. A high inflation rate resulted in falling real incomes, thereby eroding the economic well-being particularly of the poor and vulnerable segments of society.

To help address the situation, the Asian Development Bank (ADB) approved a single tranche $1 billion special policy-based loan (SPBL) for the Economic Stabilization Program in December 2019. The SPBL was part of a comprehensive multi-donor economic reform program led by the International Monetary Fund (IMF) that aimed to help Pakistan mitigate the significant negative economic and social impacts of an extraordinary macroeconomic crisis.  It was aligned with the country’s overarching development objectives of strengthened macroeconomic management and more sustained and inclusive growth. Its intended outcome was sustainable fiscal position with reduced external imbalances achieved.  Through 11 policy actions, it sought to achieve the following outputs: (i) exchange rate management strengthened, (ii) public resource management improved, and (iii) social protection enhanced

The government fully achieved all the policy actions and therefore all the targeted outputs by 31 October 2019, more than a month prior to the SPBL approval. The program had no adverse impacts on the poor or other vulnerable groups during implementation. The policy actions were appropriately sequenced to achieve the outcome. The shock absorption displayed by the implementation of the market-based exchange rate in June 2019 enabled the State Bank of Pakistan (SBP) to proceed with a large easing of monetary policy and a sizeable expansion of export refinancing facilities that allowed gradual improvement in exports despite the global recession caused by the pandemic.

The Public Financial Management Act was promulgated in June 2019. Under that Act the government laid a Mid-year Budget Review Report in the National Assembly and published a budget manual, a budget strategy paper, and statements of contingent liabilities and fiscal risks that have been made part of the Annual Budget Statement. Treasury Single Account rules and procedures have also been finalized.

The social sector reforms in the program strengthened the cash distribution system to female beneficiaries. During the first wave of the coronavirus disease (COVID-19) in the first half of 2020, the government distributed PRs177 billion to more than 14.6 million beneficiaries, most of whom were female. This was made possible through the banking contract signed between Benazir Income Support Programme (BISP) and new bankers under the SPBL. Under the financial inclusion strategy for women (to ensure financial and digital inclusion of the target group of women), the BISP shifted to cashless banking for 7 million beneficiaries of the Ehsaas program, introduced by the government in March 2019 to address poverty and inequality comprehensive

The completed policy actions and attainment of output targets enabled the program to fully achieve its outcome targets.  Specifically, a current account surplus of $1.1 billion was achieved during the first 6 months of FY2021, PRs150 billion was generated by the energy sector state-owned enterprises through quarterly tariff adjustments, 98% of BISP program beneficiaries received cash transferred through biometric verification, and the primary balance (surplus) reached 0.5% of gross domestic product by the end of FY2020.  Overall, the program contributed significantly to the country’s overarching development objectives thus achieving its envisaged impact

The Ministry of Finance (MOF) was the program executing agency.  The implementing agencies were the Federal Board of Revenue, the Ministry of Energy, MOF, and SBP.

Project ID
Report Date
Project Number
Report Type
Policy-based loan
Goal 8: Decent Work and Economic Growth
Goal 16: Peace, Justice, and Strong Institutions
Loan Number
Date Approved
6 December 2019
Source of Funding
Report Rating
Report Year
Independent Evaluation, ADB
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