In a bid to help maintain Pakistan's economic stability, the World Bank has approved $500 million interest-free loan to the country, which is reeling under severe financial crisis.
The interest-free credit to support Pakistan is aimed to regain and maintain economic stability and to bring the economy back to a higher growth path, the World Bank said.
However, the credit from the International Development Association (IDA), the World Bank's concessionary lending arm, carries a 0.75 per cent service fee, a 10-year grace period, and maturity of 35 years.
The bank said Pakistan has experienced severe external and internal shocks in the recent past 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 global recession dampened external demand for Pakistan's exports.
On the internal side, political turmoil and uncertainties affected the investor's confidence which together with macroeconomic imbalances led to capital outflows, it said.
The Poverty Reduction and Economic Support Operation, the Bank said, is designed to support Pakistan's policy measures that promote macroeconomic stability, besides seeking to strengthen its competitiveness by bolstering the financial sector and cutting barriers to business entry and exit.