Pakistan’s future secured? $20 billion World Bank loan could change everything

Business owners and citizens alike are delighted after the World Bank (WB) approved a 20-billion-dollar loan package for Pakistan. The aims of the WB for providing the loan package aligns closely with Prime Minister Shehbaz Sharif’s economic plan Uraan Pakistan.

Experts are predicting that the loan package will significantly bolster the health of Pakistan’s economy and increase the standard of living. The loan package aims to eradicate gaps in education, improve access to healthcare facilities and protect vulnerable segments of Pakistani society from climate change risks.

The terms of the loan are fairly advantageous to Pakistan as well. A staggering 14 billion dollars of the amount will be in the form of concessional loans. This means that the economy can significantly benefit from the lax terms of the loan if authorities can leverage the loan amount to build sustainable solutions to the issues that are currently plaguing the economy.

The primary issue to be addressed is that of creating a financially sustainable energy sector. Currently, power producers and distributors are causing the economy to tank as they are heavily contributing to the rapid growth of circular debt.

Najy Benhassine, WB’s country director for Pakistan, highlighted issues pertaining to the energy sector and the paramount importance of tackling said issues. If Pakistan can use the loan amount to set up an efficient system of power distribution, free from theft and defaulters, users of the national electricity grid may witness a drop in electricity bills.

This spells great news for businesses, especially industrialists in the textile sector as they utilize a large amount of electricity. A drop in electricity costs will result in greater revenues for the textile sector - which accounts for 60 percent of Pakistan’s export revenues.

The loan amount will also be allocated to educational and healthcare ventures. According to the Ministry of Federal Education and Professional Training, the current literacy rate sits below 63 percent.

This means that 37.7 percent of Pakistan’s population is illiterate which translates into a staggering 60 million people. This is enough to reveal the reality of the education gap Pakistan possesses when compared to the rest of the world.

It does not help that the people who do receive formal education are more likely to leave the country in favor of foreign countries where wages are higher. This exacerbates the gap in education Pakistan has with the rest of the world.

Having an educated workforce is known to have positive effects on both an individual’s financial outcomes and on the growth of the economy. According to ResearchGate, various studies have revealed that a 7-8 percent increase in earnings can be witnessed with an additional year of schooling.

With the WB interested in improving educational outcomes, Pakistan may witness a growth in the national average income in the coming years. This could help the economy retain skilled workers for local businesses.