$940m loans reignite debate

Expert says ADB, World Bank debts are 'shaping policy' as govt continues to borrow

KARACHI:

Pakistan has secured nearly $940 million in new development financing from the Asian Development Bank (ADB) and the World Bank to support state-owned enterprise (SOE) reforms, climate resilience in Sindh, and improved urban services in Punjab. While officials describe these interventions as critical for governance reforms and climate adaptation, economists caution that Pakistan's persistent reliance on external borrowing underscores deep structural weaknesses and risks entrenching long-term dependency. On the other hand, international lenders present their financing as assistance to Pakistan, but in reality, they are pursuing their own business interests and pushing the country deeper into a debt quagmire.

Renowned economist Nadeemul Haque argued that Pakistan's growing reliance on ADB and World Bank loans reflects a troubling deviation from sustainable development. According to Haque, Pakistan now resembles highly aid-dependent economies such as Laos and Cambodia, while peer economies eye self-financing growth.

Speaking to The Express Tribune, Haque said, "There is no one left eager to borrow. The lenders now need somebody to lend their money so they can charge interest. It is their business model." He contends that repeated borrowing entrenches dependency, imposes externally driven reform templates, and undermines the evolution of robust local institutions.

He criticised development lenders for using loans as instruments of policy imposition, referring decades of Structural Adjustment Programmes that enforced liberalisation, privatisation, and austerity with limited success. According to him, Pakistan's public administration has become fragmented under donor-funded units, and knowledge production remains skewed in favour of foreign consultants who shape policy without sufficient local input.

On Thursday, ADB approved two projects totalling $540 million, including a $400 million results-based loan for the Accelerating SOE Transformation Programme and a $140 million concessional loan for the Sindh Coastal Resilience Sector Project. The SOE initiative aims to address governance and performance gaps in Pakistan's sprawling commercial SOE portfolio, which includes loss-making entities across energy, transport, and infrastructure.

The SOE reform programme for Pakistan seeks to improve governance and optimise the performance of Pakistan's commercial SOEs, which are vital for the country's economic stability and development, said ADB Country Director for Pakistan Emma Fan. A key reform area is the restructuring and commercialisation of the National Highway Authority, one of Pakistan's most indebted public enterprises, whose liabilities continue to strain federal finances.

According to ADB, the SOE loan is its first results-based operation dedicated solely to public sector management reforms in Pakistan. The Bank noted progress achieved since 2023 with the enactment of the SOE Act, central monitoring mechanisms, and the introduction of service obligation agreements. The new financing is designed to advance institutional capacity, digitalisation, road safety, and financial sustainability across priority SOEs. A complementary $750,000 technical assistance grant will support implementation and capacity building.

Simultaneously, ADB's $140 million coastal resilience project will target disaster-prone districts of Badin, Sujawal and Thatta, aiming to protect over 500,000 people, secure agricultural land, and restore degraded forest areas. Co-financed by the Green Climate Fund, the project will upgrade drainage and flood protection systems, rehabilitate mangroves, build climate-resilient water infrastructure, and allocate at least 25% of community-based funding to women-led initiatives.

In a parallel development, the World Bank approved $400 million for the Punjab Inclusive Cities Programme, which will upgrade water supply, sanitation, sewerage, drainage, and solid waste management systems in 16 cities. The project aims to deliver reliable WASH (water, sanitation, and hygiene) services to 4.5 million residents and improve waste management for two million people. The institution highlighted expected reductions in waterborne diseases and child stunting, enhanced municipal revenues, and stronger capacity of urban local governments.

"Reducing child stunting is essential for Pakistan's future," said Bolormaa Amgaabazar, World Bank Country Director for Pakistan. Senior Urban Specialist Amena Raja added that the programme integrates climate resilience by enhancing cities' ability to withstand floods and droughts.

However, the fresh inflow of financing has reignited debate over Pakistan's heavy dependence on multilateral lenders, particularly as the country continues to face persistent fiscal deficits, declining exports, and structurally weak institutions.

The broader challenge, experts note, is that Pakistan's fiscal landscape remains dominated by interest payments, low productivity, constrained revenue mobilisation, and a struggling private sector. Without sustained domestic reforms and growth-oriented policy shifts, reliance on external capital, even when concessional, may deepen vulnerabilities.