Two multilateral development banks—World Bank and Asian Development Bank—approved nearly $940 million in new loans for Pakistan this week. The funds are earmarked for state enterprise reforms, infrastructure projects, and climate resilience initiatives. The decision, made in Islamabad in June 2024, aims to both modernize the economy and improve residents’ quality of life. The banks moved forward despite warnings from economists who clearly point out that additional loans deepen Pakistan’s reliance on foreign creditors. The loans are set to support reform implementation through specific programs and infrastructure projects, as representatives of both institutions emphasize approved nearly $940 million in new funding for Pakistan this week[1].
New Loans for State Enterprise Reforms and Urban Infrastructure
On Thursday, the Asian Development Bank announced $540 million in funding for two projects. Of this, $400 million will go to the State-Owned Enterprises Transformation Acceleration Program, while $140 million is a concessional loan for the Sindh Coastal Resilience Sector Project. Separately, the World Bank approved $400 million a day earlier for the Punjab Inclusive Cities Program Asian Development Bank approved $540 million on Thursday. World Bank separately approved $400 million on Wednesday[2].
State Enterprise Reform: Goals and Tools
The ADB’s state enterprise reform program centers on restructuring the National Highway Authority, one of the country’s most indebted public enterprises. According to Emma Fan, ADB Country Director for Pakistan, the initiative is designed to improve governance and optimize the performance of state-owned enterprises, which she describes as “essential for the country’s economic stability and progress” Emma Fan, ADB Country Director for Pakistan, said the initiative aims to strengthen governance[3]. strengthen governance and optimize the performance of commercial state-owned enterprises.
These reforms are not starting from scratch. The program builds on changes introduced since 2023: a state enterprise law was passed, a central monitoring unit established, and service obligation agreements implemented. The ADB will also provide an additional $750,000 in technical assistance to support implementation The program builds on reforms introduced since 2023. ADB will provide an additional $750,000 in technical assistance.
Punjab City Modernization and Tackling Malnutrition
In Punjab, the World Bank aims to upgrade water supply, sanitation, and waste management systems in 16 cities, benefiting about 4.5 million residents. Bolormaa Amgaabazar, World Bank Country Director for Pakistan, highlights that the project addresses stunting in children by investing in “safe water, sanitation, and hygiene services to break the cycle of malnutrition and disease” the project addresses the problem of stunted growth in children[5]. benefiting around 4.5 million residents.
Economists’ Concerns: Debt Spiral and Structural Weaknesses
Not everyone views the new loans with enthusiasm. The latest funding tranche has reignited debate over Pakistan’s growing dependence on external creditors. Economist Nadeem ul Haque is blunt: in his view, Pakistan increasingly resembles economies such as Laos or Cambodia, which are permanently reliant on foreign aid. Speaking to The Express Tribune, he stated: “there’s no one left willing to borrow,” while lenders “need someone to lend their money to so they can charge interest” Economist Nadeem ul Haque argued that Pakistan now resembles economies heavily dependent on aid[6]. lenders “need someone to lend their money to so they can charge interest”[7].
International Monetary Fund data paints a stark picture. Pakistan’s total government debt is projected to remain at about 72–73% of GDP, with domestic debt accounting for nearly half of GDP and generating high interest costs. At the same time, the federal fiscal deficit is expected to fall from 6.8% to 4.0% of GDP Pakistan’s total government debt is projected to remain at about 72–73 percent of GDP[8]. the federal fiscal deficit will decrease from 6.8 percent to 4.0 percent of GDP[9].
Climate Resilience and Ecosystem Restoration in Sindh
In Sindh, the coastal project co-financed by ADB and the Green Climate Fund (with a $40 million contribution) aims to protect over half a million people in the disaster-prone districts of Badin, Sujawal, and Thatta. The plan also includes restoring 22,000 hectares of degraded forests, which is crucial for rebuilding local ecosystems The coastal project in Sindh, co-financed with a $40 million contribution from the Green Climate Fund[10]. will protect over 500,000 people in disaster-prone districts of Badin, Sujawal, and Thatta, while restoring 22,000 hectares of degraded forests[11].
Pakistan faces a choice: more loans or a deep overhaul of public finances? The debt indicators are sobering, but without investment in infrastructure and crisis resilience, the country risks stagnation. Will external support be enough to break the cycle of underinvestment and debt?