The World Bank (WB) has delayed the approval of two loans totaling $1.1 billion until the next fiscal year, causing a significant setback for the government.
Additionally, the lender has opposed the imposition of a flood levy on imports, further complicating an already ambitious $32 billion annual financing plan.
The delayed loans include the second Resilient Institutions for Sustainable Economy (RISE-II) loan worth $450 million and the second Programme for Affordable Energy (PACE-II) loan worth $600 million. The PACE-II loan may also be approved in the next fiscal year
The government had hoped to receive approval for at least the $450 million loan in January, which would have also unlocked another $450 million from the Asian Infrastructure Investment Bank, which had tied its loan to the WB’s RISE-II loan approval.
The coalition government was already facing challenges in reviving the International Monetary Fund (IMF) program. The World Bank’s (WB) recent decision to delay the approval of two loans worth $1.1 billion has now created a shortfall of $1.5 billion in the government’s annual financing plan.
Prior to the revival of the IMF bailout package in August, the WB had agreed to increase its lending to cover a $300 million gap. However, this agreement seems to have been lost due to a lack of action from the federal government.
The WB spokesperson added that preparation of the RISE-II operation is underway and the World Bank is working closely with the government toward the implementation of supported reforms.
The government had planned to receive between $30 billion and $32 billion in foreign financing this fiscal year, but that now seems unrealistic.
This plan included loans of $2.9 billion from the WB. With foreign reserves currently at $4.3 billion, Pakistan may not be able to make it to June without support from foreign creditors.
The United Arab Emirates is expected to provide a $1 billion loan and Saudi Arabia is also “studying” the possibility of extending an additional $2 billion, however, no dates for disbursement have been announced yet.
Source: Express TribuneÂ
