The Ministry of Economic Affairs has firmly refuted recent reports claiming that the World Bank (WB) cancelled a $500 million loan for Pakistan, stating that the information was misleading and misrepresented the country’s financial engagement with the international lender. The clarification comes after a news outlet reported on Friday that the World Bank had withdrawn the loan due to Pakistan’s inability to meet certain conditions.
In an official statement, the Ministry dismissed these claims, emphasizing that “the news item misrepresents facts regarding Pakistan’s financial engagement with the World Bank and its impact on the country’s development programmes.” The Ministry further elaborated that the alleged loan was neither approved by the WB Board nor signed by the government, refuting the basis of the claim entirely. Additionally, the ministry noted that the report was published without seeking input from either the Ministry of Energy or the Ministry of Economic Affairs, highlighting a lack of due diligence by the news outlet.
The World Bank remains Pakistan’s largest multilateral development partner, with an active portfolio of 53 projects valued at $15.33 billion. Since 1950, the World Bank has provided over $46 billion in financial assistance to Pakistan across various sectors. The Bank continues to support Pakistan through a range of financing instruments, including Investment Project Financing (IPF), Programme for Results (PfR), and Development Policy Financing (DPF).
According to the Ministry’s statement, the Programme for Affordable and Clean Energy (PACE) was initiated in 2020 as a budget support programme aimed at reforming the energy sector. Under its first phase, PACE-I, significant prior actions were successfully completed, including tariff adjustments with Independent Power Producers (IPPs), approval of the National Electricity Plan, and rationalisation of subsidies. PACE-I was valued at $400 million and was approved by the World Bank Board in June 2021, with the funds subsequently disbursed.
However, the Ministry clarified that PACE-II, the second phase of the programme, was never formally initiated, as the World Bank’s focus shifted towards investment projects. These include major initiatives like the $1 billion financing for the Dasu hydropower project and support for improvements in power distribution and transmission infrastructure. There was no decision to cancel PACE-II, as it never progressed beyond initial discussions, the Ministry reiterated.
The government’s recent pivot from Development Policy Financing (DPFs) to Investment Project Financing (IPFs) reflects a strategic focus on addressing critical infrastructure needs in the power sector. Urgent priorities such as enhancing generation capacity, improving transmission efficiency, and curbing line losses have taken precedence. As such, the Ministry clarified that PACE-II was never included in the budget estimates for fiscal years 2022, 2023, or 2024 and, therefore, has had no impact on Pakistan’s external financing requirements or World Bank-supported budgetary programmes.
The Ministry emphasized that ongoing reforms in the energy sector are progressing successfully, with strong support from the World Bank. Misleading claims about loan cancellations risk undermining confidence in these development initiatives, which are crucial for addressing Pakistan’s energy and infrastructure challenges.
This clarification reaffirms the World Bank’s commitment to its partnership with Pakistan and highlights the importance of accurate reporting, particularly on matters involving economic policy and international development assistance. Stakeholders are encouraged to rely on official statements and verified information to better understand the status of Pakistan’s engagement with international financial institutions.
The Ministry concluded by underscoring that Pakistan’s collaboration with the World Bank remains robust, with ongoing projects aimed at fostering economic growth, improving infrastructure, and ensuring long-term sustainability across key sectors.