Big blow to bankrupt Pakistan as World Bank cancels Rs 42404750000 loan, failed to meet key conditions, Shehbaz Sharif to…

The PACE (Program for Affordable and Clean Energy) program is an initiative approved by the World Bank in June 2021

Written by: Victor Dasgupta Edited by: Victor Dasgupta

Published: December 15, 2024, 1:02 PM IST

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https://www.india.com/news/world/pakistan-world-bank-china-cancels-rs-42404750000-loan-failed-shehbaz-sharif-xi-jinping-united-nation-islamabad-7466791/ Copy

Pakistan PM Shehbaz Sharif

Islamabad: In a major move, the World Bank cancelled a loan of over USD 500 million that was to be provided to Pakistan. The move is seen as a major setback for an already bankrupt Shehbaz Sharif-led country. The World Bank has stated that Pakistan failed to meet crucial conditions within the specified timeframe.

According to The Express Tribune, one of the key requirements was the revision of the power purchase agreement related to the China-Pakistan Economic Corridor (CPEC). The report also added that it will not approve any new budget aid loans for Pakistan during the current fiscal year. This has been seen as a significant blow to Pakistan’s economy.

A spokesperson for the World Bank stated, “There is no budget assistance plan for the current fiscal year, which will end in June 2025.” The IMF has identified an external financing gap of USD 2.5 billion that needs to be addressed through new loans.

WORLD BANK:

The World Bank (WB) is an international financial institution, created in conjunction with the International Monetary Fund (IMF) at the Bretton Woods Conference (New Hampshire, USA, July 1-22, 1944). The World Bank brings together 189 member countries, which are responsible for the institution’s funding methods and allocation of funds.

WHAT IS PACE?

• The PACE (Program for Affordable and Clean Energy) program is an initiative approved by the World Bank in June 2021
• The program aimed at promoting affordable and clean energy in Pakistan.
• Under this program, the World Bank initially approved a loan of $500 million, which was later increased to $600 million
• The first installment of $400 million has already been disbursed.
• However, recently, it was reported that the World Bank canceled the loan that was to be provided under the PACE-II program, which was intended to support energy transition efforts in Pakistan.

The second installment of this program was contingent on fulfilling several conditions, such as negotiating with all Independent Power Producers (IPPs), especially those involved in Chinese power plants under the China-Pakistan Economic Corridor (CPEC). It was found that no progress had been made in renegotiating agreements with CPEC-related power plants, as China has consistently refused to reconsider these deals or extend the repayment deadlines for loans granted to Pakistan for these power projects, which amount to approximately USD 16 billion.