Pakistan secures $3.2 billion in loans from foreign lenders

• Saudi Arabia promises $1.2 oil facilities for Islamabad.
• Dubai Islamic Bank pledges $1 billion.
• IDB, SCB pledge $600 million and $430 million, respectively.
  

ISLAMABAD: Amid Prime Minister Shehbaz Sharif-led government’s efforts to tackle various challenges on the economic front, the government has secured a foreign loan commitment of $3.2 billion from international creditors, including the Saudi Arabian Oil Facility (SOF). of $1.2 billion over the next 12 months; The News reported on Tuesday.

The loan pledges include a $1.2 billion loan facility pledged by Saudi Arabia, $1 billion in commercial loans from Dubai Islamic Bank (DIB), $600 million from SCB and about $430 million from the International Islamic Trade Facility Islamic Development Finance Corporation (ITFC).

The development comes after the International Monetary Fund (IMF) Executive Board approved a new $7 billion loan program last month, which was then followed by the first tranche of $1.03 billion (SDR 760 million) disbursed in Islamabad .

The borrowing plan for the financial year 2024-25 put forward by the Ministry of Finance revealed that Pakistan expected to raise $19.274 billion during the current financial year. External inflows of $19.2 billion did not include the amount of borrowing secured by the IMF under the Extended Fund Facility (EFF).

Pakistan is projected to receive $4.56 billion from multilateral creditors including the World Bank, Asian Development Bank, Islamic Development Bank and Asian Infrastructure Investment Bank (AIIB), bilateral $9.4 billion, commercial banks $3.779 billion dollars, international bonds $1 billion and Naya Pakistan certificate $0.5 billion.

Top sources said the federal finance minister recently visited the Kingdom of Saudi Arabia, but nothing has been signed so far as a result of his visit.

He could have discussed the possibilities, including the term sheet for finalizing the $1.2 billion Saudi Arabian Oil Facility (SOF) and the Reko Diq deal. This scribe had sent questions last week to senior finance ministry officials but had not received a response by the time the report was filed.

The 25th year borrowing plan states that the government remains committed to completing all actions related to multilateral program loans, which are in the pipeline and are expected to be disbursed during the year.

Key multilateral program loans during FY25 are from ADB, which include: (i) Climate and Disaster Resilience Improvement Program (subprogram I) of $400 million; (ii) Women Inclusive Finance (sub-programme II) of $100 million. and (iii) Domestic Resource Mobilization (subprogramme II) of $300 million.

In addition, the government aims to complete all performance and policy actions (PPAs) as agreed with multilateral development partners. The government plans to convert bilateral deposits from China of $4 billion and Saudi Arabia of $5 billion.

For foreign commercial loans, the government intends to refinance loans of foreign commercial banks amounting to about $3.878 billion. In addition, a plan is to raise an additional $1.2 billion in new commercial debt.

The government is seeking to raise about $1 billion through the issuance of Panda Bonds in Chinese capital markets and Green Bonds in international capital markets. There is no Eurobond or International Sukuk maturing in the 25th year.

Pakistan is struggling with the profound effects of climate change, such as changing weather patterns and devastating floods. The scale of this climate transition underscores the need for sustainable financing.

In this regard, the government aims to create a sustainable financing framework in order to: (i) promote sustainable and green financing; (ii) Addressing and preventing the adverse effects of climate change. (iii) Ensuring compliance with the Sustainable Development Goals (SDGs). and (iv) Meeting the objectives as defined through the Nationally Determined Contributions.

To this end, the Ministry of Finance works with the joint sustainability coordinators. With positive macroeconomic developments and the availability of a favorable window, the possibility of an inaugural green, social or sustainability bond issue in 4Q25 will be explored.

For Panda Bond, Islamabad is planning to carry out the maiden issue of Panda Bond in the Chinese capital markets. To this end, China Development Bank, China International Capital Corporation, Habib Bank Limited and Ci+ Bank are acting as joint financial advisors.

The plan is to issue a $300 million Panda Bond over the 25th year. The process of engaging third party services, e.g. of domestic/international legal advisors and rating agencies is already underway.