World Bank loans over $1 Billion to cash-strapped Pakistan after IMF's $500 million aid

In a bid to uplift Pakistan's crippled economy, the World Bank signed agreements with Islamabad to provide a loan of USD 1.336 billion, just days after the International Monetary Fund (IMF) agreed to release a tranche of USD 500 million loan. The loan sanctioned by the World Bank is expected to assist the cash-strapped country's foreign exchange reserves and also provide a boost to infrastructure projects. As per PTI, a total of six project agreements were signed between Islamabad and The World Bank totalling the loan amount to USD 1.336 billion. 

The six agreements signed with the World Bank are aimed at assisting the Pakistan government's initiatives in social protection, disaster and climate risk management, improving infrastructure for resilience, agriculture, food security, human capital development, and governance sectors, as per The Dawn. The Pakistani newspaper reported that the first USD 600 million loan agreement pertained to the Crisis-Resilient Social Protection Programme (CRISP) to support the development of a more adaptive social protection system that will contribute to future crisis-resilience among poor and vulnerable households in the country.

Pakistan's debt rises

Previously in May last year, the World Bank had sanctioned a loan amount of USD 500 million to help Pakistan mitigate the adverse impact of the Coronavirus pandemic. The World Bank's board had agreed to release a tranche of 500 million USD to assist Pakistan in improving the quality of healthcare and education, support economic opportunities for women and also limit the impact of the COVID-19 pandemic. With frequent lending, Pakistan's debt continues to rise at a swift pace. As per reports, Islamabad's debt grew from PKR 32.1 trillion in November 2019 to PKR 35.8 trillion in November 2020, excluding the IMF loans and liabilities owed by the Imran Khan government indirectly. 

Earlier in February this year, finance minister Dr. Hafeez Sheikh presenting the Fiscal Policy and Debt Policy Statement to parliament revealed that Pakistan’s total debt is Rs 36.5 trillion with Rs 11.5 trillion borrowed during the past two years – Rs 600 billion for debt servicing, Rs 3 trillion for the rupee-dollar parity correction and 1.5 trillion rupees for subsidies to meet the tax shortfall due to COVID-19 outbreak.

UAE demands return of loan 

Sending shockwaves across Pakistan, the United Arab Emirates (UAE) has demanded its USD 1 billion back from the debt-ridden economy led by PM Imran Khan. According to reports, the amount had been deposited with the State Bank of Pakistan (SBP) and has now reached its maturity. 

Last year, Pakistan had managed to pay back part of a loan secured from Saudi Arabia after its all-weather friend - China - had come to Imran Khan's rescue. With China's help, Pakistan paid back USD 1 billion out of the USD 3 billion loan it had secured back in 2019 to avoid default on international debt obligations. As per reports, Islamabad had sought Beijing's help to return USD 1 Billion to avoid any adverse impact of the partial withdrawal of the Saudi lifeline. In October 2018, Saudi Arabia had agreed to provide $6.2 billion worth of financial package to Pakistan for three years.