Pakistan gets another World Bank loan for Karachi development

Pakistan on Tuesday signed a loan agreement worth $ 787 million with the World Bank to renovate the country’s water and sanitation system.

Economic Affairs Division Secretary Noor Ahmed signed the loan agreements on behalf of Pakistan while representatives of Sindh, Khyber Pakhtunkhwa and National Transmission & Despatch Company (NTDC) signed the agreements for their respective projects. WB Country Director for Pakistan Patchamuthu Illangovan signed the agreements on behalf of the World Bank.

Minister of Economic Affairs Hammad Azhar was also present on the occasion.

The loan was granted for projects related to urban mobility, urban management and service delivery, improvement of water and sanitation services, tourism and electricity sectors.

According to the details, an amount of $ 382 million would be spent on the Karachi mobility project (yellow line). The objective of the project is to improve mobility, accessibility and safety along the yellow Bus Rapid Transit (BRT) Corridor in Karachi. The project will help develop urban road infrastructure (yellow corridor), rehabilitate or rebuild road infrastructure along the yellow corridor, and develop and operationalize a BRT system.

Read more: Pakistan among top 15 countries to reduce extreme poverty: World Bank

In the meantime, $ 40 million has been allocated to the Karachi Water and Sanitation Services Improvement Project (Phase 1). The project aims to improve access to drinking water services in Karachi and increase the financial and operational performance of the Karachi Water and Sewerage Board (KWSB).

Likewise, an amount of $ 230 million would be spent on the competitive and liveable city of Karachi project. The objective of the project is to improve the performance of local councils and agencies in Karachi in urban management, financing and service delivery; and improve the business environment for private sector development in Karachi.

The World Bank Country Director, while appreciating the government’s reform initiatives, pledged to extend possible support and facilitation to the government to help get the economy back on track.

The Khyber Pakhtunkhwa Integrated Tourism Development Project would receive funding of $ 70 million. The project would help improve infrastructure conducive to tourism, develop tourism assets and strengthen management for sustainable tourism development in the KP.

In addition, the agreement also provided additional funding of $ 65 million for the Central Asia and South Asia Electricity Transport and Trade Project (CASA-1000). The objective of the current project is to create conditions conducive to a sustainable electricity trade of 1,300 MW between the countries of Central Asia (Tajikistan and the Kyrgyz Republic) and the countries of South Asia (Pakistan 1,000 MW , Afghanistan 300 MW).

Speaking on the occasion, the Minister of Economic Affairs said that the signing of five projects worth $ 787 million demonstrates the determination of the World Bank to support the development agenda of the government in power.

The World Bank Country Director, while appreciating the government’s reform initiatives, pledged to extend possible support and facilitation to the government to help get the economy back on track.

Pakistani debt repayment

PTI’s rhetoric blames previous government policies that put the country in debt. While this remains true, PTI will inevitably continue this trend of taking out loans like its predecessors.

Read more: Pakistan Considering $ 250 Million World Bank Loan to Boost Human Capital

It is natural for a country to issue bonds, finance infrastructure projects through long-term debt instruments, and use capital markets, both domestic and foreign, to meet its financial needs. funding. Therefore, the plans agreed with the World Bank for the sustainable development of the country are commendable.

However, it is important that countries follow a carefully calibrated borrowing policy that minimizes the various risks associated with additional indebtedness, such as interest rates and refinancing. Therefore, policymakers need to ensure that Pakistan is able to repay or roll over these medium and long term loans.

Pakistan’s total external debt increased over time between 2008 and 2018, according to the State Bank’s annual reports:

Source: State Bank of Pakistan Annual Report

This trend should continue given the accelerated pace of projects in the China-Pakistan economic corridor, which is weighing on our external debt.

While the recent Treasury bill trading through foreign investors paints a promising picture for minimizing external debt, or at least allowing for timely repayments, it does not address the domestic debt problem that is at the root of the majority of Pakistan’s debt problems.

world Bank

Source: State Bank of Pakistan Annual Report 2018-2019

The World Bank took several other initiatives aimed at Pakistan’s development in 2019, such as providing loans worth $ 918 million for higher education and KPK’s revenue mobilization program announced in June, but the government should have economically viable plans in place to avoid further exploitation in the hands of international institutes.

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