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ISLAMABAD: The World Bank has approved a $12 billion loan for cash-strapped Pakistan to be given out in a period of five years, the country's finance ministry said on Friday.
The finance ministry said the money will target “energy, economy, (fighting) extremism and education”, with $1 billion being transferred to Pakistan in the next week increasing Pakistan's foreign exchange reserves substantially.
The loan will carry a two per cent interest rate.
Pakistan is struggling to overcome a massive energy crisis, and a shortfall in tax revenues, and has borrowed heavily to pay government expenditure.
Pakistan Day was celebrated at the World Bank yesterday, and in the two Development Policy Credit (DPCs) USD one billion was approved for energy and revenue support during the current financial year.
The other land mark achievement of the day was the approval of Country Partnership Strategy under which Pakistan will get US $ 11 billion in the shape of project loans and budgetary support, a statement issued by the Ministry of Finance said on Friday.
It may be mentioned that the World Bank loans are purely concessionary in nature with repayment schedule spanning over a period of thirty years including five years grace period and the interest rate will be nominal at the rate of 2 per cent per annum.
On receipt of USD one billion, an equivalent amount of Rs100 billion will be reduced from the domestic debt which is much more expensive at 12.5 per cent per annum.
The WB loan will incur 2 per cent interest per annum and the Government of Pakistan will be saving net 10.5% in payment of interest on Rs100 billion.
Resultantly, there will be no net increase in overall public debt.
The Finance Minister has congratulated the whole nation on this success and observed that, the Country Partnership Strategy is aligned fully with the vision of Pakistan's development challenges around the four ES “Energy, Economy, Extremism and Education,” based on the manifesto of the Pakistan Muslim League - Nawaz (PML-N) and its commitment to the nation.
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Comments (53) Closed
May 02, 2014 04:16pm
Old habits die hard.
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May 02, 2014 05:08pm
Is this interest free loan, if it is then great make good use of it, and if the Pakistani people are paying interest on this loan and put Pakistan into further in control of the west, then there will be no mercy from God on the people and the government of Pakistan, being a muslim nation it know you are not suppose to take money on interest and serve the goal of zionist by buying weapons and fighting your own muslims brothers...
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May 02, 2014 05:18pm
The loan has to be repaid in dollars by tax revenues earned in rupees. So even if there just a 11% devaluation in the rupee against the dollar, the 2% interest on the WB loan becomes 13%. If its 15% you lose a lot. Much better to keep the local loan. If there is a crisis on the rupee some day, the government in a worst case scenario can print rupees and repay without a default.
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May 02, 2014 05:27pm
Begging UN to Pay Arabs
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May 02, 2014 05:34pm
Last year" when we get in power we will " kashkol tor dain gain" and after a year claiming as a matter of proud to get the more loan.
Doesn't has any feel of shame
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May 02, 2014 05:37pm
Loan Loan Loan..How long can a nation survive on borrowed money. With more then 52% not paying electricity bills, falling tax revenues and no investment coming the future looks bleak.
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May 02, 2014 05:59pm
Everybody close to PM pack your bags; we are going to Europe. American Express with no limit for everyone.
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May 02, 2014 06:00pm
Siri-pie for everyone in the parliament.
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May 02, 2014 06:00pm
We are being congratulated on being under an even greater debt. A loan is still a loan, no matter how low the interest rate.
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May 02, 2014 06:05pm
LOAN LOAN EVERY WHERE.
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May 02, 2014 06:12pm
They are ignoring the fact that in 30 years the dollar will be trading at huge premium and purchasing dollar and paying that loan will cost pakistan a lot more than just 2%.
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May 02, 2014 06:25pm
PML-N, you are supposed to reduce loans not take more. Otherwise we become like India. Debt ridden
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May 02, 2014 06:26pm
youth loan,and now ... loan loan .God bless us.
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May 02, 2014 06:28pm
sighingggg
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May 02, 2014 06:40pm
There should be austerity measures like Greece when taking loan to recover the economy, which Pakistan lacks due to either corruption or the money going in to pockets.
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May 02, 2014 06:50pm
Many Pakistani politicians do not even file or pay taxes and the government does not pay bills for the electricity, so how can Pakistan repay with 2 % interest on the loan, rather it will continue to be in debt. Value of the currency, Pakistani Rupee will plummet which will cost the government to buy with higher value burdening the common man.
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May 02, 2014 06:57pm
90% will be used to fight extremism.
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May 02, 2014 06:57pm
Are you people reading the same article that I am??? This will reduce the debt burden. Kudos to the govt of Pakistan!
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May 02, 2014 07:00pm
Congrats. to Pakistani brothers on this great achievement...!!!!!!
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May 02, 2014 07:02pm
2% per annum that's pretty good... Get rid of the expensive domestic debt...
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May 02, 2014 07:12pm
did any of you even read this article before start crying. it is said in it that. this loan of 12B "interest rate will be nominal at the rate of 2 per cent per annum" and it will be used to pay off "domestic debt which is much more expensive at 12.5 per cent per annum". So if you still don't get it, this is another form of refinancing Pakistan loans on much less Interest.
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May 02, 2014 07:20pm
how is this something for the nation to celebrate? taking out a huge loan.
It's worth celebrating if we can sort out our Tax to GDP ratio to the point where we don't need foreign loans. That is something to celebrate.
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May 02, 2014 07:44pm
At 2%, it will be a quarter billion dollars of interest every year!
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May 02, 2014 07:45pm
We, Muslims shouldn't take any Loan from Western Banks, we should promote our own banking system like Islamic banking. It is forbidden in Islam to take or give 'interest' on a loan. We look at every thing else from an Islamic perspective, why not MONEY!!
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May 02, 2014 07:52pm
@Sunil
Not a single industrialist and feudal politician in Pakistan pay tax nor abide the law.
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May 02, 2014 08:11pm
Looks like we will always be beggars!!
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May 02, 2014 08:34pm
Why do Pakistan need IMF loan for? Why just these fat bellied feudal and industrialist pay tax and utility bills as required. Pakistan was built for the masses not for these parasites.
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May 02, 2014 08:36pm
@KHAN Pakistan should concentrate on Economic Development. When religion becomes all-pervading economic progress gets hindered very badly. Pakistan should be come a secular democracy like India and have a more liberal society to Usher in economic progress.
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May 02, 2014 09:16pm
The amount of loan, aid, grants etc that Pakistan has received in the past & hope to get in the near future, if put together can count to hundreds of billion of dollars yet Pakistan stands on the same square where the nation is deprived of the basics. There should be a thorough & transparent auditing of the entire amount to pinpoint the amount that was actually used for the cause of Pakistan. It should also be ascertained the the amount stolen by the corrupt parties & leaders. A 20 years period upto the end of 2013 can can give a true picture.
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May 02, 2014 10:13pm
Beggars have no respect.
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May 02, 2014 10:24pm
PML-N = Pocket mein loan-Nawaz
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May 02, 2014 10:47pm
@Shazia Bangash
Bibi I pay you my respects!
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May 02, 2014 10:49pm
@Maulana Diesel
Maulana shaib ap kitna datay hain!
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May 02, 2014 11:24pm
We are slowly being suffocated and at the end powerless. Our leaders are trying short cuts but it never works that way .
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May 02, 2014 11:34pm
great. mashallah. Alhumdulillah. now we have wealth to plunder. the poor kisan can be bought with bag of cow dung....
no electricity. no gas. hollow slogans and beautiful roads.
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May 03, 2014 01:43am
'The Finance Minister has congratulated the whole nation on this success and observed that, the Country Partnership Strategy is aligned fully with the vision of Pakistan's development challenges around the four ES
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May 03, 2014 01:57am
Nawaz was asked ( at the airport after this news broke out)...what are you going to do now. Mr PM said right away " I am going to Disney World. "
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May 03, 2014 05:06am
"The Finance Minister has congratulated the whole nation on this success" What a joke! I wonder if correspondent reporting this news knew anything about financial policies! Is finance minister trying to tell us that in order to save approx 10 billion Rs a year in interest they are going to borrow another 12 billion USD? Where the heck is opposition? Are they sleeping?
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May 03, 2014 08:09am
@Maria Are you very young or just simple minded.
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May 03, 2014 09:09am
@Zak for your knowledge india get only 4% loan of total gdp and pakistan have 58% thats means if india wants take back loan to world bank it merge only Rs 4 in Rs 100 while for pakistan its Rs 58 from Rs 100 then you analysis yourself
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May 03, 2014 10:43am
Land mark achievement? Is that a satire
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May 03, 2014 01:51pm
"The WB loan will incur 2 per cent interest per annum and the Government of Pakistan will be saving net 10.5% in payment of interest on Rs. 100 billion."
Stop trying to fool the nation Dawn !
Comparing a 2% interest on USD 12 billion against 12.5% interest on PKR 100 billion will cost an additional sum $4.8 million per annum !
And the transaction is however void-ab-initio, as it is haram, even if it had reduced the finance cost !
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May 03, 2014 05:45pm
@Zak
We are already debt ridden!!! And how is that like India? At least India has the capacity to repay its loans - we just keep taking the money and refuse to make the structural changes that are necessary to our economy.
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May 04, 2014 02:14am
As long as there's a clause in this WB contract that clearly states the 2% loan is not linked to the devaluation of the rupee, then Mr. Dar and his team should be congratulated on a job well done.
The next step now is transparent accountability to ensure the funds are fully utilized on sea change improvements in education, power, security and infrastructure.
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May 04, 2014 05:41am
@Man from UNCLE Just being Ha..Ha..
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May 04, 2014 08:57am
WB please stop financing corrupt govt across the globe, you are the biggest reason why a nation like Pakistan is in hot water.
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May 05, 2014 12:49am
Unfair to compare 2% on dollar loan with 12% on rupee loans. Yearly rupee depreciation is larger than rate difference. Therefore it is not advisable to replace rupee loan with dollar loan.
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May 05, 2014 12:52am
@jr
Your understanding of replacing expensive rupee loans with cheap dollar loans is not correct since rupee depreciates much faster than the rate difference.
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May 05, 2014 02:52am
@Shazia Bangash it is not that simple. The best way will be to live without the items you need from abroad which may not be possible totally but can be controlled.
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May 05, 2014 03:06am
it seems like common people in Pakistan are well versed in economy but he big guns are happy borrowing by just seeing 2% vs 12% . How come they were elected by the people?
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May 05, 2014 09:17am
It can be useful if used for development purpose, which can create job opportunities for people of Pakistan. But if used for strengthening the military might and nuclear projects then its a waste.
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May 07, 2014 12:33pm
@Shazia Bangash
actually no, if you dont take local loans it open credit for private sector as well decrease locla prices. anybody knowing economics knows it. on the down side this may cause problems with respect to current account deficit but with such low interst loan its unlikley
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May 08, 2014 02:29am
How much will actually be used to help our economy and our ordinary citizens?
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