Can The World Bank’s $20B Gamble Break Pakistan’s Debt And Despair Cycle?

Pakistan’s development trajectory has long been a cautionary tale of misplaced priorities and unsustainable growth models. With a debt-to-GDP ratio hovering above 70%, a struggling economy burdened by structural inefficiencies, and widespread poverty, the country seems trapped in a vicious cycle of debt and despair. The World Bank’s new 10-year Country Partnership Framework (CPF) pledges $20 billion to address these challenges, signalling a shift away from the infrastructure-heavy projects of the past. While the strategy offers hope by prioritising human development, climate resilience, and systemic reforms, questions remain about whether it sufficiently addresses the root causes of Pakistan’s chronic debt crisis.

Unaligned Development: Debt Burden

Pakistan’s current debt crisis is the product of decades of a flawed development model, characterised by a disproportionate emphasis on infrastructure projects funded through expensive loans. Initiatives like the Indus Basin irrigation system and drainage projects, while aimed at boosting agricultural output, often prioritised short-term productivity gains over long-term sustainability. Waterlogging, salinity, and deforestation followed, eroding the natural resource base, particularly riverine ecosystems, on which millions depend. Similarly, mega-projects like highways and power plants failed to translate into equitable economic benefits, often exacerbating regional disparities and benefiting urban elites.

The heavy reliance on external borrowing to finance such initiatives has saddled Pakistan with unsustainable debt obligations. According to the State Bank of Pakistan, external debt stood at $125 billion in 2024, with debt servicing consuming over 35% of export earnings. This fiscal strain undermines public investment in critical sectors like health, education, and social protection, perpetuating poverty and inequality.

Human Development Challenges

Pakistan’s economic mismanagement is deeply reflected in its human development indicators, painting a grim picture of the country’s social challenges. The 2023 Human Development Index (HDI) report ranks Pakistan 161 out of 191 countries, trailing behind regional neighbours such as India and Bangladesh. Nearly 40% of the population lives below the poverty line, with food insecurity affecting 36.9% of households. Malnutrition remains a severe concern, as stunting among children under five is at 38%, and 7.1% of children suffer from wasting, according to UNICEF. Access to basic services like healthcare and education is equally troubling. Pakistan allocates less than 1% of its GDP to health and only 2.5% to education, resulting in low literacy rates (59%) and poor health outcomes. Maternal mortality remains high, at 186 deaths per 100,000 live births, and preventable diseases such as hepatitis and tuberculosis continue to claim thousands of lives annually.

At the core of Pakistan’s challenges lies a development model funded by the World Bank, which has historically prioritised infrastructure development, industrialisation, and economic liberalisation. While these policies promised prosperity, they inadvertently entrenched elite capture

Mental Health Epidemic

The mental health crisis in Pakistan is equally alarming. Approximately 1 in 4 Pakistanis over the age of 18 is expected to experience a mental health condition at some point in their lives. However, over 80% of those affected lack access to mental health care, largely due to widespread stigma and a lack of mental health awareness. The country’s mental health infrastructure is severely underdeveloped, with only about 500 psychiatrists and 300 clinical psychologists nationwide, resulting in an alarmingly high doctor-to-patient ratio. Contributing factors include poverty, inequality, and social injustice, which exacerbate the mental health crisis and hinder access to adequate care.

Elite Capture and Inequality

At the core of Pakistan’s challenges lies a development model funded by the World Bank, which has historically prioritised infrastructure development, industrialisation, and economic liberalisation. While these policies promised prosperity, they inadvertently entrenched elite capture, concentrating resources and decision-making power in the hands of a few. By enabling privileged groups to monopolise wealth, land, and authority, this model has marginalised ordinary citizens, exacerbated social inequalities, and eroded democratic governance. The consequences are evident: resources and authority have moved farther away from the people, while a centralised political and economic structure thrives on suppressing dissent. This inequality undermines efforts to create a sustainable and inclusive economy.

The World Bank’s Policy Shift

The World Bank’s newly launched 10-year Country Partnership Framework (CPF) for Pakistan is an ambitious $20 billion initiative designed to address Pakistan’s multifaceted crises. The CPF focuses on critical areas including child stunting, education, healthcare, tax revenue mobilisation, renewable energy, and climate resilience.

The CPF also commits to strengthening food security for 30 million individuals and enhancing climate resilience for 75 million, signalling intent to address systemic vulnerabilities.

The CPF represents a significant departure from the past. Instead of focusing solely on large-scale infrastructure, the framework prioritises six key areas: reducing child stunting, improving learning outcomes, enhancing climate resilience, transitioning to cleaner energy, mobilising public resources for inclusive development, and boosting private investment. The integration of concessional loans through the International Development Association (IDA) and additional funding from the International Finance Corporation (IFC) further underscores the emphasis on sustainability.

Specific targets include raising tax revenue to over 15% of GDP, providing quality education to 12 million students, and ensuring clean water access for 60 million people. The CPF also commits to strengthening food security for 30 million individuals and enhancing climate resilience for 75 million, signalling intent to address systemic vulnerabilities.

Breaking the Cycle of Debt and Despair

The CPF’s holistic focus is a step in the right direction, addressing some of the structural drivers of Pakistan’s debt crisis. By prioritising human development and climate resilience, the framework seeks to reduce reliance on short-term borrowing for infrastructure repairs and disaster recovery. For example, the shift to renewable energy targets adding 10 GW of capacity, which could reduce Pakistan’s dependence on expensive imported fuels and stabilise the energy sector.

Additionally, the emphasis on tax reforms is critical. With a tax-to-GDP ratio of just 8.5%, Pakistan’s fiscal capacity remains one of the lowest globally. Increasing this to 15% would not only reduce dependency on external borrowing but also enable the government to invest in social services and infrastructure maintenance.

Challenges to Implementation

Despite its promise, the CPF faces several hurdles. First, Pakistan’s governance challenges pose a significant risk. Corruption, elite capture, and bureaucratic inefficiency often undermine development initiatives. Without robust mechanisms to ensure accountability and equitable resource allocation, even well-designed programs can fail.

Second, the CPF’s reliance on concessional financing raises concerns about the sustainability of debt. While IDA loans are more affordable than commercial borrowing, they still contribute to Pakistan’s overall debt burden. The success of the CPF depends on Pakistan’s ability to generate sufficient domestic revenue and export growth to meet repayment obligations.

Third, the CPF’s ambitious goals require political will and inter-provincial coordination. For instance, improving climate resilience and water security necessitates reforms in water governance, which historically have been contentious due to regional rivalries over resource allocation.

The Way Forward

To maximise the impact of the CPF and break the cycle of debt and despair, Pakistan must adopt a comprehensive approach that addresses both immediate needs and long-term challenges:

• Strengthen Institutional Capacity: Effective implementation of the CPF requires transparent and accountable institutions. Establishing a Pakistan Data and Monitoring Lab, as outlined in the CPF, is a positive step but must be accompanied by independent oversight mechanisms.
• Prioritise Pro-Poor Investments: Public spending should focus on sectors that directly impact poverty reduction, such as healthcare, education, and rural development. Ensuring that resources reach marginalised communities is essential for inclusive growth.
• Adopt a Sustainable Economic Model: Pakistan must move away from resource-intensive growth strategies toward a model that values sustainability. This includes investing in renewable energy, promoting water-efficient agriculture, and protecting riverine ecosystems.
• Enhance Regional Trade: Expanding trade with neighbouring countries can provide an economic boost and reduce dependency on external debt. The Indus Basin’s potential for inland navigation and trade should be explored as a cost-effective alternative to traditional transport infrastructure.
• Invest in human development:  Expanding access to healthcare, improving nutrition, enhancing educational opportunities, and addressing the mental health crisis should be central to the Country Partnership Framework’s (CPF) implementation. These reforms will create a more inclusive society and lay the foundation for sustainable development.
• Engage Civil Society: The involvement of civil society and the private sector in the CPF’s design and implementation can improve accountability and dismantle elite capture. Strengthening local governance through the devolution of power is crucial to ensuring equitable resource distribution and accountability, allowing marginalised communities to shape their future. Alongside this, protecting freedom of expression and decriminalising dissent is essential for challenging entrenched power structures and fostering a participatory democracy. 

Conclusion

The World Bank’s policy shift under the CPF offers a promising framework to address Pakistan’s development challenges and alleviate its debt burden. By focusing on systemic reforms, human development, and climate resilience, the strategy has the potential to create a more sustainable and inclusive economic model. However, its success depends on Pakistan’s ability to overcome governance challenges, mobilise domestic resources, and ensure equitable implementation. Breaking the cycle of debt and despair requires not just financial assistance but a fundamental transformation in how development is envisioned and executed. For Pakistan, the CPF represents an opportunity to chart a new course—one that prioritises people over projects and sustainability over short-term gains.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}