The World Bank has announced plans to loan Pakistan $20 billion over the next ten years to help strengthen its private sector and enhance resilience against climate change, according to Prime Minister Shehbaz Sharif.
Pakistan faced a near-default crisis in 2023, exacerbated by political instability and the global economic downturn, pushing the country’s debt levels to unsustainable heights. However, a $7 billion bailout from the International Monetary Fund (IMF) helped avert the crisis, allowing the country to recover partially, with inflation easing and foreign exchange reserves improving.
Sharif stated that the World Bank funds would be allocated for various initiatives, including child nutrition, quality education, clean energy, climate resilience, inclusive development, and encouraging private investment. On social media, he highlighted that the deal demonstrated the World Bank's confidence in Pakistan’s economic resilience and potential.
Pakistan has long struggled with a narrow tax base and a heavy external debt burden, which consumes half of the country’s annual revenue. The IMF bailout, Pakistan's 24th since 1958, imposed stringent conditions, urging the government to improve tax collection and reduce costly power subsidies to address inefficiencies in the energy sector.
The World Bank confirmed that the $20 billion financial package would begin in fiscal year 2026 and continue through 2035. A statement from the bank noted that Pakistan's economy is gradually recovering, bolstered by ambitious fiscal, energy, and business reforms launched by the government.
However, the World Bank cautioned that the country’s history of inconsistent reforms may hinder investor confidence, potentially delaying new investments. Therefore, the World Bank intends to focus on "selective, stable, and larger investments" in areas critical for long-term development, requiring time and persistence to achieve lasting results.
Najy Benhassine, the World Bank’s director for Pakistan, emphasized that this agreement represents a long-term commitment to addressing the country’s most pressing development challenges.
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