WASHINGTON The World Bank approved a $350 million loan for Pakistan on Thursday, restarting a lending program frozen after the government conducted a series of nuclear tests last May. The structural adjustment loan, backing up a wide-range of economic policy reforms, was approved as expected a week after the International Monetary Fund announced the resumption of lending to sanctions-hit Islamabad. The loan will support the government of Pakistan in improving governance in the key public sector activities of banking, tax administration, public utilities, and public expenditure, the World Bank said in a statement.

The IMF on Jan. 14 approved a $575 million payment to Pakistan from a stalled, $1.56 billion loan package. The payment cleared the way for the World Bank and other donors to speed cash to Islamabad, and may set the stage for the rescheduling of Pakistan's foreign debt. Financial aid from the IMF, the World Bank and other donors was snarled in May 1998 when the international community imposed economic sanctions on Pakistan and its archrival, India, for conducting tit-for-tat nuclear tests.

In addition to World Bank aid, Islamabad hoped the IMF agreement would set the stage for the restructuring the country's $32 billion foreign debt. Bankers say the country has arrears of $1.5 billion, was using grace periods to delay payments and was facing a $5.5 billion balance of payments deficit for the fiscal year to the end of June. The World Bank said the loan would be repayable in 20 years and charge the institution's standard variable dollar interest rate.

It offers a five-year grace period. (Reuter)