Islamabad: In a major setback for Pakistan’s dwindling economy, two of its largest lenders – World Bank (WB) and Asian Development Bank (ADB) — have deferred approval of another USD 1 billion worth of loans due to delay in meeting some set conditions.
According to The Express Tribune report, the World Bank would approve USD 800 million in policy loans on June 28 against the original plan of USD 1.5 billion.
The World Bank decided to cut short the loan after Pakistan could not realize some of the set conditions, a government source said. In a similar manner, the ADB has delayed the approval of the second tranche of the USD 300 million loan for energy sector programme.
Earlier, Pakistan and the World Bank had negotiated three loans, each at USD 500 million. However, the WB postponed the approval of one loan and reduced the size of the other two loans from USD 500 million to USD 400 million each, sources told Tribune.
Answering a question on reducing the size of loans, the spokesperson of the bank’s local office said that the amount reflected had been agreed jointly by the government of Pakistan and the World Bank.
According to Tribune, the delay would not adversely affect Pakistan’s external sector position in the short term due to USD 16 billion in gross foreign exchange reserves. However, the Pakistani rupee came under some pressure and lost 44 paise to Rs 156.18 to a dollar on Monday.
Pakistan has already entered a sovereign debt “danger zone” with total liabilities and debts of USD 294 billion representing 109 per cent as a percentage of GDP as of 30 December 2020.