RAWALPINDI, Sept 30: The Asian Development Bank has approved a $500 million loan to support Pakistan’s efforts to address the adverse effects of unprecedented food and fuel price hikes on the country’s poor and its economy.

The loan will support changes in energy and agriculture sectors and help lay the foundation for a radical transformation of the economy by diversifying, deepening and expanding a competitive industrial sector and creating jobs for the young and growing labour force, a press release of the bank says.

The ADB support is part of a global financing plan for the government’s economic stabilisation programme.

The plan includes actions to shore up foreign reserves, improve monetary policy, trim fiscal deficit and cut back on government borrowing from the State Bank of Pakistan.

The plan is focussed on protecting the poor through special safety net programmes and reassuring financial markets through fiscal and monetary discipline.

“Addressing the impact of fuel and food price increases unleashes immediate benefits to Pakistan’s people and to markets,” said Juan Miranda, director-general of ADB’s Central and West Asia Department.

“The fiscal space created by reforms will cut financing gaps, generate conditions for a better deal in the sectors down the road and provide much-needed cash flow to pay for safety net programmes that protect the most vulnerable.

“ADB’s support balances the need for addressing the needs of Pakistan’s people while reassuring markets that the government is on the right track with its ongoing economic stabilisation programme.”

The plan was formulated by the government with technical advice from other parties.

“The ADB financing takes place within the context of this stabilisation framework,” Mr Miranda said.

“We are one of several parties contributing to the financing of this plan; others will soon follow with their own financing and programmes.”

Pakistan will strengthen the legal and regulatory framework of its financial sector through the ADB programme.

The State Bank has undertaken a series of actions to improve risk management in the sector, strengthen payment systems and protect consumers. This will create stability at a time when international markets are in turmoil.