Pakistan received $505 million from the World Bank, the State Bank of Pakistan said in a statement on Tuesday (July 28).
The country has been taking loans from international financial institutions to shore up its foreign exchange reserves and plug its external and fiscal deficits, the twin curse that forced it to sign a $6 billion bailout programmewith International Monetary Fund in July 2019.
The IMF programme, which helped the country avert a sovereign default, opened more doors for Pakistan as the likes of the World Bank, Asia Development Bank, and Asian Infrastructure Investment Bank also pledged support.
According to the IMF, its programme was supposed to unlock funding of $38billion from multilateral donors.
In the fiscal year 2020, Islamabad has taken over $13 billion in foreign loans, according to media reports, which quoted data from the Economic Affairs Division. The fresh loans helped the country double its dollar reserves to $12 billion this year.
The current account, Pakistan’s dollar account with the rest of the world, showed a monthly surplus in October last year and in May 2020. In the latest fiscal year, the current was down 78%.
However, going to the IMF comes at a cost. Under the programme, the SBP took measures that choked economic growth, devalued the local currency, raised power and gas tariffs, and made borrowing more expensive. These painful measures were taken to fix the twin deficit and borrowing remained one of the main tools to plug those losses.