ISLAMABAD – The federal government has decided to secure a $1 billion budgetary support loan aimed at strengthening policies to tackle climate-related disasters, while simultaneously putting on hold a $40 million project over concerns about unusually high procurement costs for furniture and laptops under foreign financing.
The decision was taken during a meeting of the Central Development Working Party (CDWP), chaired by Planning Minister Ahsan Iqbal. The forum granted conceptual approval for obtaining the loan from the Asian Development Bank under the second phase of the Climate Disaster Resilience Enhancement Programme (CDREP). The proposal will now move forward for final approval by the lender.
Officials said that half of the total amount—$500 million—is expected to be released immediately after the ADB board’s approval, likely before June, while the remaining $500 million will be reserved as contingency financing to be used in case of natural disasters over a five-year period.
According to finance ministry sources, the initial tranche will be drawn from the ADB’s Ordinary Capital Resources, and the government will contribute through policy measures and budgetary support rather than direct financial input. The contingency portion will provide quick financial relief during emergencies.
The funding is intended to support improvements in disaster management systems, including strengthening institutional capacity, implementing the National Disaster Management Plan, operationalising the National Emergency Operations Centre, and promoting climate-resilient investments and flood risk management.
The authorities acknowledged that Pakistan remains highly exposed to climate risks such as floods, droughts, and extreme weather, which continue to inflict heavy economic and social losses. Estimates suggest the country requires between $30 billion and $60 billion annually to effectively address climate challenges.
The government has also recognised gaps in coordination among institutions and weaknesses in disaster governance, along with the absence of a structured disaster risk financing system, which increases fiscal vulnerability due to reliance on post-disaster funding.
As part of reforms linked to the loan, Pakistan has committed to establishing a comprehensive disaster risk financing framework, with a target of mobilising Rs200 billion to ensure timely response to emergencies.
The contingency financing component is expected to support around nine million vulnerable households during disaster situations. The loan will carry a 15-year repayment period, including a three-year grace period, with interest rates determined under the ADB’s flexible lending terms and a nominal commitment fee on undisbursed amounts.
Pakistan loses 1% of GDP annually to climate-related damages
