Pakistan’s growing reliance on development financing from multilateral lenders has once again come under scrutiny following the approval of nearly $940 million in new loans by the Asian Development Bank (ADB) and the World Bank. While government officials have framed the funding as essential for governance reforms, climate resilience, and urban development, economists warn that continued dependence on external borrowing reflects deep-rooted structural weaknesses and risks reinforcing long-term economic vulnerability.
The latest financing package includes ADB and World Bank support for state-owned enterprise (SOE) reforms, climate adaptation initiatives in Sindh, and improvements in urban services across Punjab. Critics argue that although these projects address pressing challenges, the repeated reliance on multilateral lenders highlights Pakistan’s inability to finance development through domestic resources and sustainable growth.
Renowned economist Nadeemul Haque has cautioned that Pakistan’s increasing dependence on institutions such as the ADB and World Bank signals a troubling drift away from self-reliant development. He noted that Pakistan increasingly resembles highly aid-dependent economies, while comparable countries are moving toward self-financing growth models. According to Haque, external lenders present their financing as development assistance, but their underlying objective remains the expansion of lending portfolios and interest-based returns.
Speaking to local media, Haque argued that repeated borrowing embeds dependency and allows external actors to exert influence over domestic policy choices. He criticised decades of structural adjustment programmes that promoted liberalisation, privatisation, and fiscal austerity, often with mixed or limited success. He further observed that donor-driven reforms have fragmented Pakistan’s public administration, with parallel project units and foreign consultants shaping policy outcomes with limited local ownership.
On Thursday, the ADB approved two projects worth $540 million. This includes a $400 million results-based loan under the Accelerating SOE Transformation Programme and a $140 million concessional loan for the Sindh Coastal Resilience Sector Project. The SOE reform initiative targets governance and performance challenges across Pakistan’s commercial SOEs, many of which operate at a loss in sectors such as energy, transport, and infrastructure.
ADB Country Director for Pakistan Emma Fan stated that the SOE programme aims to improve governance and optimise the performance of commercial SOEs that are critical to economic stability. A key component involves restructuring and commercialising the National Highway Authority, one of Pakistan’s most indebted public entities, whose liabilities continue to weigh heavily on federal finances.
According to the ADB, the SOE loan represents its first results-based operation in Pakistan dedicated exclusively to public sector management reforms. The bank highlighted progress made since 2023, including the enactment of the SOE Act, the establishment of central monitoring mechanisms, and the introduction of service obligation agreements. The new financing is intended to strengthen institutional capacity, support digitalisation, improve road safety, and enhance financial sustainability. An additional $750,000 technical assistance grant will support implementation and capacity building.
Alongside SOE reforms, the ADB’s $140 million Sindh Coastal Resilience Sector Project will focus on climate-vulnerable districts including Badin, Sujawal, and Thatta. The initiative aims to protect more than 500,000 people, secure agricultural land, and restore degraded forests. Co-financed by the Green Climate Fund, the project includes upgrading drainage and flood protection systems, rehabilitating mangroves, developing climate-resilient water infrastructure, and allocating at least 25% of community-based funding to women-led initiatives.
In parallel, the World Bank approved $400 million for the Punjab Inclusive Cities Programme. The project seeks to upgrade water supply, sanitation, sewerage, drainage, and solid waste management systems in 16 cities, delivering improved WASH services to 4.5 million residents and enhanced waste management for two million people. World Bank officials highlighted expected reductions in waterborne diseases, lower child stunting rates, stronger municipal revenues, and improved capacity of urban local governments.
World Bank Country Director for Pakistan Bolormaa Amgaabazar described reducing child stunting as critical for the country’s future, while senior urban specialists emphasised the programme’s focus on climate resilience against floods and droughts.
Despite these development objectives, the fresh inflow of financing has reignited debate over Pakistan’s heavy reliance on multilateral lenders. Economists note that persistent fiscal deficits, weak export performance, limited revenue mobilisation, and low productivity continue to constrain the economy. With a large share of government revenue consumed by debt servicing, Pakistan’s fiscal space remains narrow.
Experts argue that without sustained domestic reforms, productivity gains, and a stronger private sector, continued reliance on concessional external financing could deepen economic vulnerabilities. While multilateral loans may provide short-term relief and targeted improvements, critics warn that long-term stability will remain elusive unless Pakistan addresses the structural foundations of growth and reduces its dependence on external capital.
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