World Bank approves $12 billion, five-year loan for Pakistan: Ishaq Dar

Published: May 2, 2014
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The ministry said the money will target "energy, economy, (fighting) extremism and education". PHOTO: ZAFAR ASLAM/EXPRESS

The ministry said the money will target "energy, economy, (fighting) extremism and education". PHOTO: ZAFAR ASLAM/EXPRESS

ISLAMABAD: The World Bank has approved a $12 billion loan for cash-strapped Pakistan that will disbursed over five years, the country’s finance ministry said on Friday.

The ministry said the money will target “energy, economy, (fighting) extremism and education”, with $1 billion being transferred to Pakistan in the next week.

The loan will carry a 2% interest rate.

Pakistan is struggling to deal with a massive energy crisis, high unemployment and a shortfall in tax revenue. It has borrowed heavily to pay to cover government expenditure.

Pakistan relies on imported oil to run most of its electricity grid, but often cannot afford to pay for it, causing daily power cuts that have damaged many industries.

The country was facing a balance of payments crisis last year and had only enough cash for one month’s worth of imports before the International Monetary Fund approved a package of $6.7 billion in September.

Since then, Finance Minister Ishaq Dar has helped boost the country’s cash reserves.

In February, Saudi Arabia gave Pakistan a gift of $1.5 billion. In April, Islamabad raised $2 billion raised in a Eurobond offering and $1.1 billion from an auction of 3G and 4G telecommunications licenses.

But money remains tight. The IMF loan is largely being spent on repaying a previous one from the Fund.

Pakistan needs about $1 billion a month to pay for its imports, and energy demand will peak during the sweltering summer months to come.

The first tranche of World Bank money will be spent on refinancing short-term, high-interest loans that the government has taken.

Pakistan is facing a large shortfall in tax revenue. Some wealthy Pakistanis pay no income tax, which the government has repeatedly promised, and failed to change.

Many legislators and some ministers evade tax, according to the Center for Investigative Reporting in Pakistan, a non-government organization.

Social services and infrastructure are crumbling while politicians splurge on personal bodyguards, foreign trips, luxuries and land for their personal use.

Activists say rage at government corruption and neglect are fuelling two insurgencies.

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Reader Comments (27)

  • SM
    May 2, 2014 - 6:18PM

    Build a dam

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  • Major Iqbal
    May 2, 2014 - 6:24PM

    Will Pakistan ever become self-sufficent?

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  • Gratgy
    May 2, 2014 - 6:41PM

    Pakistan- the true Loan Ranger

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  • Patriot
    May 2, 2014 - 6:44PM

    The ‘Loan Ranger’ is back with a vengeance. Getting a loan favors the lender and never the takers. Otherwise Greece and Indonesia would have been the most prosperous countries of the world.

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  • Ahmed Sharif
    May 2, 2014 - 6:44PM

    What happened to the Nawaz Govt they are borrowing like crazy. they already borrowed $10 billion and now $12 billion loan altogetter a $22 billion loan in 11 months. There intentions seems to be lutto te phutto. Their govt is disrupted. They have controlled of their govt. Their ministers saying different things. Noora always on trips of tax payers money on his personal business trips to look after his personal international businessess. Is there any laws or anybody who could stopped these crooked from looting national wealth. That borrowed money will not be spent on people so let Mr. Sharif paid these loans. Why the money is borrowed for which project. no body knows.

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  • Shuaib
    May 2, 2014 - 6:52PM

    The ONLY way forward is increasing tax revenue, by implementing the current tax laws.

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  • May 2, 2014 - 7:05PM

    Part of this will finance Dar’s overseas mansion and accounts.

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  • Chachoo
    May 2, 2014 - 7:38PM

    And who will repay these loans in the future?. The current government is set to privatize everything to meet budget deficit and by the next government i am afraid the only thing left to sell will be our people and infact the entire country.

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  • Maulana Diesel
    May 2, 2014 - 7:48PM

    Take loans and stash it in swiss banks and then take refuge in saudia. what a mess. why don’t these culprits bring tax defaulters to net.

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  • Raj - USA
    May 2, 2014 - 8:04PM

    No worries. China is paying $ 31 billion for buying out Baluchistan and these loans can be easily repaid.

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  • Khan
    May 2, 2014 - 9:12PM

    Loans and Loans and Loans…..These thugs from punjab has no idea what they are harvesting for future (I guess thats not what they are elected for)…………..For them taking loan from WB or IMF is like taking loan from PAKISTAN STATE BANK (which can be forgiven at their discretion by passing laws)………….BAD LOAN is what these THUGS call it.

    WHY WOULD THEY CARE, THEY HAVE BUSINESS IN KSA, UK, USA etc…..They themselves are safe.

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  • asim
    May 2, 2014 - 10:12PM

    1-This violates article 38 (f) to abolish Riba

    2- This violates Fiscal Responsibility and Debt Limitation Act of 2005.According to the State Bank of Pakistan, the country’s total public debt and liabilities reached Rs17.251 trillion as on December 31, 2013, or 70.5pc of GDP.
    Limit is 60% of GDP.

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  • M. Anis
    May 2, 2014 - 10:34PM

    This is really a concern now. The loans being taken first to repay the earlier loan was understandable, but now that they have sufficiently raised the foreign exchange reserve with arrangement from IMF, world bank, from friends of Pakistan a handsome gift, then float of bonds in US dollar at heavy rate of interest and raising of money from G3 and G4 auction. You are also going to raise funds through selling of some of the hot earning companies like UBL, PPL, PSO and OGDC. Mr. Dar it seems you are heading the country towards point of no return. Circular debt issue is again becoming a headache, what have you done to eliminate this in future, it has grown again within a few months. You have senselessly revalued the value of Pakistan Rupee which will eventually have a negative impact on Pakistan exports, the widening gap between inter-bank exchange rates and open market rate will also discourage our expatriates to send family maintenance through illegal means. here seems to be no way for you to keep control on exchange rate and eventually it will go up rocket high if balance of payment will not improve significantly. This is the core issue that you have to handle. I wll not be surprised if The repayment of these loans probably will be made at the exchange rate of Rs.150 or even higher.

    STOP right here please, we know that when the repayment time will come you will not be the minister. Perhaps you will not be seen in Pakistan. We do not need any more loans. Tell us how are you going to repay these loans when they mature. With the current policies you are not helping stand Pakistan on its feet. You seems to cutting the branch of the tree on while sitting on it.

    Please think think and think again for the sake of our next generations.

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  • Grace
    May 2, 2014 - 10:36PM

    @Major Iqbal: India has yet to become self sufficient so why place such demands on Pakistan? In today’s gloabalized world, nations have to deal with international lenders to get things going economically. That’s why international banks and market funds are looking more optimistically to Pakistan since the new government is in. When the economy improves and the tax base widens and tax collection improves, all of these low interest loans can be paid off.

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  • usman786
    May 2, 2014 - 10:36PM

    now that we have loan on 2% should not we return the recently obtained Euro bond that has interest of 7.5%

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  • Al
    May 2, 2014 - 11:07PM

    Dar and Co are part of the problem. The ruling elite with their overseas wealth, do not pay taxes. Can NS and Dar evade tax in UK..NO.

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  • hmm
    May 2, 2014 - 11:13PM

    Now things are getting out of hands! PMLN will have wonderful 5 years but miserable future for us Pakistanis who will be paying off these debts! Politicians will earn billions, set up businesses in Pak & abroad, buy few homes around the world & have millions of dollars stashed safely in swiss banks. We as a nation, on the other hand, haven been abandoned & enslaved to these monetary banks for next few decades! And when i say “we” i mean those Pakistanis who are going to live here forever unlike our elite ruling class. I feel so disgruntled seeing how things have been moving on since 2008, the so called start of democracy. God bless Pakistan.

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  • Blithe
    May 2, 2014 - 11:31PM

    Good long-term funding at a very cheap price. Please use in hydro and other non-oil infrastructure for electricity production.

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  • Nadeem
    May 2, 2014 - 11:33PM

    @Shuaib:
    and the tax revenue will bring foreign currency?

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  • Faraz
    May 3, 2014 - 12:23AM

    increase the tax net and capture tax evaders mr ishaq dar.

    taking loans for paying loans is just foolish

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  • Parvez
    May 3, 2014 - 12:26AM

    …….and how are we going to pay these loans back ?
    I blame the giver more than the taker, because the taker is simply greedy, selfish and irresponsible, while the giver is doubly greedy because he knows this.

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  • May 3, 2014 - 1:17AM

    Spend them well

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  • SAL
    May 3, 2014 - 2:51AM

    How much you guys are going to BEG? Gen. Musharraf’s era was great, he paid off all the Loans you guys had borrowed and brought Pakistan UP as a Loan free country like IMF, etc.

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  • Haris
    May 3, 2014 - 2:44PM

    What the !!! where is the list of projects where these 12 billion dollars are going to be utilized ? …. .what do you mean by they gonna be spent on economy, education and terrorism !!! ….Shouldnt we first have a concrete list of projects and reforms before we even beg for loans ? ….This is insane…Seems like all this money going directly to swiss bank (or atleast a huge portion of it !!)

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  • observer
    May 4, 2014 - 12:10AM

    “Pakistan is struggling to deal with a massive energy crisis, high unemployment and a shortfall in tax revenue. It has borrowed heavily to pay to cover government expenditure.”

    The reason Pakistan has such a massive energy crisis is that the Establishment has for the past six decades pursued the policy of “we will fight India in a 1000 year war and we will get the Islamic bomb and Kashmir by eating grass”. As a result of this geopolitical expansionist policy, a vast portion of national GDP and income had been spent on fancy military equipment, nuclear weapons, missiles and a huge army. This has resulted in little economic growth but has gifted Pakistan with a huge domestic and foreign debt.

    Just to service the interest payments on these accumulated debt, the government has to spend over 43% of national income. See: http://www.thenews.com.pk/Todays-News-3-183371-Debt-servicing-to-consume-40pc-of-budget-outlay

    Pakistani Establishment made a deliberate choice to become a security garrison state. I now has to live with the consequences. The economic and energy outcomes would have been vastly different if instead Pakistan had made the choice to give priority to economic development and social/welfare justice.

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  • observer
    May 4, 2014 - 12:16AM

    @Ahmed Sharif:

    “Why the money is borrowed for which project. no body knows.”

    I am sure you know where most of the borrowed money is going to go if the past history is any indication. Clue- missiles, fighter jets, more nukes, submarines, an even bigger army….

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  • May 4, 2014 - 11:23AM

    Loans from WB, IMF, ADB. The reward from US to Pakistan for allowing withdrawal of forces and equipments worth Billions, if not 1 or 2 Trillion.

    But, they are still loans. Pakistan simply does not have the capability to repay them.

    Since, India is also a partner in these institutions and gives money for lending, I really hope Pakistan doesn’t default on its loans and gives back every penny. There is no writing off of loans this time.

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