The Pakistan government signed a USD 330 million loan agreement with the Asian Development Bank (ADB) on Saturday. This funding will support the Integrated Social Protection Development Programme (ISPDP). Economic Affairs Secretary Kazim Niaz and ADB Country Director Emma Fan were present at the signing, as reported.
Niaz emphasized the significance of the loan, stating it would strengthen institutional capacity and improve access to education and healthcare services. “This support will help us expand critical services for the people,” he said.
In response, Emma Fan reiterated ADB’s commitment to assisting Pakistan. She highlighted that the loan would promote inclusive growth, reduce poverty, and improve healthcare access for vulnerable groups. “It will improve healthcare access for vulnerable populations,” she added.
World Bank Cancels $500 Million Loan
In contrast, Pakistan faced a setback when the World Bank canceled a $500 to $600 million loan. This cancellation followed Pakistan’s failure to meet essential conditions, including revising power purchase agreements under the China-Pakistan Economic Corridor (CPEC), according to reports.
The loan was part of the Affordable and Clean Energy Program (PACE-II), which the World Bank approved in 2021. While the first $400 million tranche was released, the second tranche was contingent on renegotiations with Independent Power Producers (IPPs), especially Chinese plants under CPEC.
No Progress on CPEC Power Plant Agreements
Moreover, Pakistani officials acknowledged that no progress was made in renegotiating agreements with CPEC-related power producers. Chinese authorities have repeatedly rejected reopening these deals, including restructuring Pakistan’s $16 billion energy debt. Consequently, the World Bank canceled the loan.
Impact on Pakistan’s Financial Situation
Furthermore, the World Bank announced it will not offer any new budget support loans this fiscal year. This decision will impact Pakistan’s expectations of securing $2 billion in fresh loans. Pakistan has now nearly exhausted its loan quota with the World Bank.
Despite the ADB loan, these financial challenges highlight the urgent need for Pakistan to address issues within its energy sector and rebuild relationships with international lenders.