The World Bank has canceled a $500 million loan to Pakistan due to the country’s failure to meet important conditions. One key condition was renegotiating power purchase agreements under the China-Pakistan Economic Corridor (CPEC), which Pakistan has been unable to achieve.
This cancellation is a major setback for Pakistan’s financial plans, as the government had counted on receiving $2 billion in loans this year.
With this loan canceled, Pakistan is unlikely to get any new budget support loans during the current fiscal year, as the country has already used up most of its borrowing quota.
The canceled loan was part of the Affordable and Clean Energy program (PACE-II). This program aimed to help Pakistan bridge its energy financing gap and make electricity more affordable. However, despite ongoing talks to renegotiate energy contracts, including those under CPEC, no significant savings or reductions in electricity costs have been made.
The World Bank’s decision reflects growing concerns about Pakistan’s ability to manage its energy sector and finances effectively. The country now faces increased challenges in stabilizing its economy and meeting energy needs.
This development highlights the importance of resolving issues in Pakistan’s energy agreements and addressing inefficiencies in its power sector. Without progress in these areas, securing future financial support may become even more difficult.
