World Bank cancels loan to Pakistan over unmet key conditions
The World Bank has canceled a
$500-600 million budget support loan to Pakistan due to the country's failure
to meet key conditions, including the revision of power purchase agreements
under the China-Pakistan Economic Corridor (CPEC).
This decision could impact the
government's budget estimates, which had anticipated $2 billion in new loans
during the current financial year.
Read More World
Bank: $1 billion loan approved for Pakistan's Dasu hydropower project
The canceled loan was part of the
Affordable and Clean Energy program. Initially, the World Bank approved a $500
million loan, later increasing it to $600 million to address Pakistan's
external financing gap. However, the second disbursement was contingent on
successful negotiations with Independent Power Producers (IPPs), particularly
Chinese-owned power plants under CPEC.
The loan was ultimately canceled due
to Pakistan's inability to renegotiate these power agreements and China’s
refusal to restructure the country’s energy debt of approximately $16 billion.
Despite efforts to reduce electricity prices by renegotiating deals with plants
set up under the 1994 and 2002 energy policies, only minimal reductions have
been achieved.
Read More ADB
greenlights $659 million loan for three projects in Pakistan
A World Bank spokesperson confirmed
that due to slower-than-expected progress, the lender has revised its approach
to supporting energy sector reforms in Pakistan. Although no new budget support
loans will be provided this fiscal year, the World Bank will continue to
support the power sector indirectly through financing low-cost hydropower
projects.
Source: Daily Ausaf