* ADB backs expanded trade finance (Adds quote, details)

By Michael Georgy

ISLAMABAD, Sept 20 (Reuters) - Pakistan's agricultureindustry -- a pillar of the economy -- could take up to twoyears to start recovering from devastating summer floods, theAsian Development Bank (ADB) said on Monday.

The ADB and the World Bank are assessing the damage causedby one of Pakistan's worst natural disasters, which destroyed1.3 million hectares of crops just before the harvest of keyproducts such as rice, maize and sugarcane.

"Once the country gets back on its feet, it will be able tomeet part of those agricultural import needs that will happenover the next two years," Philip Erquiaga, director general ofADB's private sector operations, told Reuters.

"We are thinking within that time horizon we should be ableto see the agriculture sector coming back," he told Reuters.

Agriculture is Pakistan's second largest sector, accountingfor over 21 percent of gross domestic product. Nearly 62percent of the population depends on agriculture for theirlivelihoods.

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The ADB said earlier it could provide Pakistan with around$1.5-$2 billion of trade finance to help with recovery andreconstruction after the floods, some $500 million more than itearmarked originally.

The ADB expects half of that increase to be used for basiccommodities, including food and medicine, said Erquiaga.

"The balance of that we will probably see coming in theform of capital goods imports related to reconstruction," hesaid.

In 2009, ADB's Trade Finance Programme exposure of $249million to Pakistan banks supported $983 million in trade.

The floods, triggered by heavy monsoon rains in late July,forced at least 10 million people from their homes.

Washington wants economic and political stability inPakistan, which it sees as a vital ally in its war onmilitancy.

Last week, the U.S. Special Representative for Afghanistanand Pakistan, Richard Holbrooke, said Pakistan's allies couldonly do so much to rebuild the country. The government, hesaid, had to raise tens of billions of dollars itself.

Pakistan's economy was already fragile before the disasterand the cost of rehabilitation will likely push the 2010/11fiscal deficit to between 6 and 7 percent of GDP against anoriginal target of 4 percent.

Pakistan's tax-to-GDP ratio is about 10 percent, one of thelowest in the world, and while the government has called forgreater revenue collection, it has done little to broaden avery narrow tax base.

The ADB said previously it would extend a $2 billionassistance package to Pakistan to help repair damage fromfloods. (For more Reuters coverage of Pakistan, see:http://www.reuters.com/places/pakistan)