Pakistan's relationship with the World Bank is one of the longest and most extensive in the developing world. Since joining the institution in 1950, Pakistan has received close to $50 billion in assistance. Today, it has one of the largest active portfolios of the World Bank, with over 100 ongoing projects. These cover areas like energy, water, education, and climate resilience. In 2025, the World Bank and the Government of Pakistan launched a new decade-long Country Partnership Framework (CPF), worth about $20 billion, to support economic stabilization and inclusive growth.
World Bank's ongoing projects in Pakistan:
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Boosting Energy Security through Transmission (BEST-PAK)
Focused on expanding and upgrading Pakistan's electricity transmission network — $375.9 million.
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Public Resources for Inclusive Development (PRID)
Supporting reforms in public-resource management, including electricity subsidy reform — $700 million.
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Gabral-Kalam Hydropower Project
Development of an 88 MW hydropower project in Swat.
History of the World Bank
The World Bank was established in 1944 as the International Bank for Reconstruction and Development (IBRD), alongside the International Monetary Fund (IMF) at Bretton Woods. Initially, its purpose was to rebuild war-torn economies after the Second World War. Over time, however, its focus shifted toward long-term development financing in low- and middle-income countries, guided by its twin goals of ending extreme poverty and promoting shared prosperity. The Bank is now part of a group of five institutions called the World Bank Group (WBG). For developing countries like Pakistan, it mainly works through the IBRD and the International Development Association (IDA), which gives concessional loans and grants.
Early Engagements and Landmark Projects
Pakistan's engagement with the Bank dates back to the early years of its independence.
1960
The Indus Waters Treaty
In the 1950s, the World Bank played a crucial mediating role in resolving the Indus Waters dispute between Pakistan and India. This mediation culminated in the Indus Waters Treaty of 1960, which remains a cornerstone of water management and regional stability to this day.
1970s
The Tarbela Dam
The Bank helped finance the Tarbela Dam, one of Pakistan's most ambitious infrastructure projects, on the Indus River. While it provided much-needed hydropower and irrigation benefits, it also displaced thousands of people and submerged dozens of villages, raising concerns about the Bank's resettlement and environmental safeguards.
1988
Private Sector Energy Development Project
By the late 1980s, Pakistan faced chronic power shortages that constrained economic growth. The World Bank responded by launching the Private Sector Energy Development Project (PSEDP), aimed at attracting private investment to expand power generation capacity.
1994
Policy Framework for Private Power
PSEDP laid the groundwork for Pakistan's 1994 Policy Framework and Package of Incentives for Private Sector Power Generation, which offered generous fiscal and tariff guarantees to Independent Power Producers (IPPs). The policy led to the establishment of the country's first major private power plant, HUBCO, and marked the beginning of large-scale private participation in Pakistan's energy sector.
The Costs of Liberalization
While these reforms were meant to mobilize private capital and end energy shortages, they also introduced structural imbalances that continue to burden Pakistan's economy. By the late 1990s, the share of hydropower in electricity generation had fallen from 47% to 29%, while reliance on imported fossil fuels rose sharply. Between 1996 and 2001, electricity tariffs increased by about 60%, and the cost of purchasing power from IPPs came to account for nearly half of WAPDA's operating expenses.
The heavy contractual obligations under the Bank-backed policy soon led to disputes. In 1998, the government issued multiple Notices of Intent to Terminate against IPPs on grounds of corruption and technical irregularities, while private producers accused the state of violating contracts. Both sides eventually turned to the World Bank for arbitration, highlighting the tensions between its role as a policy advisor and that of a neutral mediator.
The Energy Paradox
Ironically, while the World Bank's 1990s policy advice helped entrench a carbon-intensive and expensive fuel mix, it now seeks to reverse those very outcomes. Under the new Program for Affordable and Clean Energy (PACE), valued at $40 billion, the Bank aims to reduce generation costs and decarbonize Pakistan's energy sector by promoting renewable energy and efficiency reforms. However, this effort underscores a paradox: the same institution that once encouraged fossil fuel–based private power expansion must now help the country pivot toward cleaner alternatives.
Conclusion
The World Bank has played a defining role in shaping Pakistan's development trajectory, from mediating the Indus Waters Treaty and financing dams to restructuring the power sector and advising on private participation. While its projects have delivered institutional support, they have also produced social, environmental, and fiscal trade-offs. The Bank's challenge now lies in reconciling its historical emphasis on liberalization with the urgent need for inclusive and sustainable growth. To move beyond past missteps, its future engagement must ensure that development financing strengthens not only economic stability but also social equity, environmental resilience, and energy justice in Pakistan.
