The Asian Development Bank announced on Tuesday that it has approved a new assistance programme for Pakistan worth an annual sum of USD 1.2 billion aimed at improving infrastructure and creating jobs.
The Manila-based bank said Pakistan, which has suffered sluggish growth in recent years, was on track to meet targets for cutting poverty.
But it said overall development was below potential and further institutional reforms were needed.
Tax collection in Pakistan is tiny, severely hampering the government's ability to manage its finances.
A chronic crisis in the power sector -- made worse by poorly targeted subsidies -- is also a major brake on growth.
"The main challenge in Pakistan was to deliver higher, sustained and inclusive growth to cut poverty and create productive jobs for the growing labour force," ADB Pakistan country director Werner Liepach said in a statement.
The new programme, which runs until 2019, will target six sectors including energy, transport and public sector management, the ADB said.
The funds will support improvements to highways and provincial roads, as well as to power generation and transmission and bus rapid transit schemes in Karachi and other cities.