Pakistan gets $500 million WB loan

KARACHI (Agencies) - Pakistan has received a $500 million loan from the World Bank to help stabilise the economy, an official at State Bank of Pakistan said Tuesday.
The loan is interest-free and for 35 years, said the SBP official, who didn’t want to be named.
The loan from the bank’s International Development Association is aimed at helping protect the poor and improving the country’s competitiveness by shoring up the financial sector and cutting barriers to starting a business.
“The loan from the World Bank will help contain the current account deficit, which in the year ended June 30, 2008, ballooned to more than $14 billion, putting immense pressure on the country’s forex reserves,” said Mohammed Imran, head of research at First Capital Equities Ltd., a Karachi-based brokerage house.
“Besides this, the arrival of inflows from the International Monetary Fund and Asian Development Bank amounting to $1.44 billion in coming days will help strengthen the rupee,” Imran said. But, in order to help exports, the central bank may not allow the rupee to rise, he added.
According to the World Bank, Pakistan has experienced severe external and internal shocks in the past year and is confronting a very difficult macroeconomic situation. The rise in international oil and food prices sharply inflated the country’s import bill and the subsequent slowdown in the global economy dampened demand for Pakistan’s exports.
Also, political turmoil and uncertainty affected investor confidence which, together with macroeconomic imbalances, led to capital outflows, the World Bank said in a Press release March 27.
According to latest State Bank of Pakistan data, the country’s foreign exchange reserves rose to $10.161 billion in the week ended March 14 from $10.053 billion the previous week.