Pakistan secures $20 billion World Bank loan for sustained growth

ISLAMABAD: The World Bank plans to approve a $20 billion loan package for Pakistan under a new 10-year strategy to address key challenges in health, education, and climate resilience.

This approach marks a shift towards long-term development, aiming to shield projects from political instability and ensure progress despite expected changes in government during 2025-2035.

According to official documents, the framework will provide $14 billion in concessional loans through the International Development Association (IDA) and $6 billion through the International Bank for Reconstruction and Development (IBRD). However, these loans depend on Pakistan’s financial performance and debt indicators.

Additionally, the framework aims to facilitate $20 billion in private investment through the World Bank’s International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), bringing the total package to $40 billion.

The World Bank board is expected to approve the plan on January 14, and Vice President for South Asia Martin Raiser is likely to visit Islamabad afterward. The framework will focus on six target areas and phase out funding for less impactful sectors like transport, higher education, and urban infrastructure.

The first area is reducing child stunting by improving health, nutrition, and family planning services, particularly for adolescent girls, mothers, and newborns. The plan targets providing 54 million people with quality health services and ensuring 60 million people access clean water and sanitation.

The second area focuses on reducing learning poverty by improving school attendance and quality education, especially for girls. The plan aims to enroll 12 million out-of-school children in primary and secondary education.

The third priority is increasing climate resilience, targeting 78 million people with improved capacity to handle climate risks and ensuring nutrition security for 17 million people.

The fourth area involves decarbonizing the environment, with plans to reduce air pollution by 25% and produce 10 GW of renewable energy.

The fifth area is increasing fiscal space by improving tax collection and rationalizing spending. The goal is to raise the tax-to-GDP ratio to 15% and direct 60% of public spending toward the poorest half of the population.

The sixth focus area is boosting private investment to improve productivity, targeting $20 billion in private capital investment.

The World Bank plans to support the implementation with two-year rolling business plans. It aims to move away from smaller, scattered investments and focus on larger, stable projects critical for Pakistan’s long-term development.

The framework comes as Pakistan recovers from recent economic challenges, including political instability, the Covid-19 pandemic, and the 2022 floods. The World Bank highlighted that inconsistent policies, trade barriers, and external conflicts have hindered Pakistan’s growth, leading to high rates of child stunting, learning poverty, and underinvestment in critical areas.

By focusing on long-term, stable investments, the World Bank aims to shield its programs from the effects of frequent political changes and create sustained development in Pakistan.

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