ISLAMABAD: The World Bank has approved $12 billion in loans for Pakistan to be disbursed in five years, including $1bn to be provided next week.

Rachid Benmessaoud, the bank’s director for Pakistan, told journalists at a video conference on Friday that the World Bank group approved a $1bn loan on Thursday to support the country’s economic reforms, aimed at improving performance of power sector and triggering growth and investment for poverty reduction and shared prosperity.

The bank also approved a new Country Partnership Strategy (CPS) for Pakistan envisaging a ‘notional financing envelop’ of $11 billion for the next five years (fiscal years 2015-19) for development work in both public and private sectors.

Mr Benmessaoud parried a question about non-inclusion of Pakistan’s priority project — the Diamer-Bhasha dam — in the five-year CPS. (The World Bank’s reluctance to financially support the project is quite clear by now. As an alternative to Bhasha dam, the bank is supporting the Dasu hydropower project.)

Answering a question, the World Bank’s country director said the government should grant independence to the National Electric Power Regulatory Authority (Nepra) instead of influencing its decisions.

He, however, clarified that approval of the new loans was not linked to any raise in the power tariff.

Providing details, he said the $600 million loan, along with additional financing from the Asian Development Bank and the Japan International Credit Agency, would help the country develop an efficient power system that could meet the needs of its people and economy in a sustainable and affordable manner.

The aim is to influence policy and institutional actions that will improve financial viability and thus reduce the burden of public financing for the sector — making it possible to provide subsidies to the poorest, improve tariff policy, open the market to private participation, and ensure accountability and transparency.

Mr Benmessaoud said that another loan of $400m was aimed at assisting the government in accelerating economic growth, for creating jobs and opportunities for all through private and financial sector development, improved business environment, better trade and financial inclusion and enhancing revenues.

The two loans had a maturity of 25 years and a grace period of five years.

Mr Benmessaoud said the CPS was anchored in the government’s framework of 4Es (Energy, Economy, Extremism and Education) and initial priorities were made part of the forthcoming Vision 2025.

The CPS was flexible enough to allow for quick reallocation of resources in case of unforeseen needs or emergencies, he said.

The World Bank director described the four strategic pillars of the CPS as transforming the energy sector, supporting private sector development, reaching out to the underserved and the poor, and accelerating improvements in public service delivery.

Meanwhile, a statement by the finance ministry said Finance Minister Ishaq Dar, who was in the UK, authorised Pakistan’s ambassador in Washington to sign the agreement with the bank on behalf of the government to facilitate disbursement of $1bn next week.

The ministry said the loans were “purely concessionary in nature” with repayment schedule spanning over 30 years, including a five-year grace period. The interest rate would be nominal at about two per cent per annum.

The ministry said the $1bn loan would raise the country’s foreign exchange reserves significantly and help reduce by about Rs100 billion the country’s domestic debt which was much more expensive at 12.5 per cent per annum.

It said the government would be saving about 10.5 per cent interest per annum without increasing the total public debt.