Two loans totalling $1.5 billion have been issued to Pakistan by the World Bank and Asian Development Bank (ADB) under the latter’s COVID-19 Active Response and Expenditure Support (CARES) programme to rescue the pandemic-hit economy.
“COVID-19 hit Pakistan’s growth at a critical juncture in its macroeconomic recovery process. The pandemic is expected to lead to a sharp decline in growth, revenue collection, and significant job losses in Pakistan”, the Manila-based bank stated.
This is the third loan in two months’ time from the ADB to Pakistan. On 19 May, the ADB approved a separate $300 million emergency assistance loan and in April it reallocated $30 million.
Islamabad, which spends a huge chunk of its tax-collected money to repay foreign creditors, reached out to bilateral creditors earlier this year in hope for some relief.
The country was trapped in a vicious cycle of debt even two years before Imran Khan took office, with loans standing at $148.4 billion and rapidly growing ever since. Khan was a staunch opponent of foreign loans as a rescue measure while a member of the opposition party, but has embraced it reluctantly since coming to power in 2018.
Pakistan’s public debt, which stood at 87.5 percent of gross domestic product (GDP) at the end of the last financial year, is estimated to increase to 90 percent of GDP by June this year.
Meanwhile, the World Bank projects that the current account deficit, the imbalance between imports and exports, will narrow down to 1.9 percent in FY20, as imports contract more than exports.