SBP and IFC sign agreement to boost local currency lending in Pakistan

• The SBP-IFC partnership aims to expand financing for the private sector.
• IFC to manage foreign exchange risks, increase investment in rupees.
• SBP says the move will help create jobs nationwide.
  

The State Bank of Pakistan (SBP) and the International Finance Corporation (IFC) — a member of the World Bank Group — have signed an agreement to expand local currency financing and support private sector development in Pakistan.

The agreement, signed under the International Swaps and Derivatives Association (ISDA), will allow the IFC to manage foreign exchange risks more effectively and increase its investment in Pakistani rupees, the central bank said in a statement on Monday.

“This is an important step towards freeing up funding for critical sectors of the economy and creating jobs across the country,” the statement said.

It quoted SBP Governor Jameel Ahmad as saying, “Promoting the development of the private sector in Pakistan is paramount to the country’s successful, sustainable economic development.”

He added that the partnership with the IFC aims to enhance financing opportunities for the private sector.

IFC Vice President and Treasurer, Finance and Mobilization John Gandolfo said: “With currency volatility posing significant risks to developing economies, access to local currency financing has never been more important.”

“Promoting this type of financing is a strategic priority for the World Bank Group and a catalyst for economic growth in Pakistan,” Gandolfo added.

Currency risks are a major challenge for companies in developing economies that borrow in hard currencies such as the US dollar while earning revenue in local currencies, the statement said.

He said that addressing this currency mismatch is necessary not only to strengthen the ability of local businesses to mitigate risks and maintain economic resilience, but also to support broader economic stability.

The statement further notes that through this partnership with IFC, SBP aims to strengthen economic resilience, promote private sector development and improve foreign exchange liquidity in Pakistan, it added.