The World Bank on Thursday agreed to provide US$500 million interest-free loan to Pakistan to help the country to address economic crisis.

Pakistan has experienced severe external and internal shocks in the past year and is confronting a very difficult macroeconomic situation, the World Bank said in a statement.

The rise in international oil and food prices sharply inflated the country's import bill and the subsequent slowdown in the global economy dampened external demand for Pakistan's exports. On the internal side, political turmoil and uncertainties affected investor confidence which, together with macroeconomic imbalances, led to capital outflows.

Yusupha Crookes, World Bank Country Director for Pakistan said that important policy steps taken by the Pakistan government have succeeded in reducing external imbalances, rebuilding foreign exchange reserves, narrowing fiscal overruns, and lowering inflation.

Protecting the country's poor and vulnerable people is essential during the stabilization process, said Satu Kahkonen, World Bank Lead Country Economist for Pakistan.

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