Pakistan seeks $4 billion loans from
Middle Eastern banks amid IMF approval delay
Pakistan is actively negotiating
with Middle Eastern banks to secure approximately $4 billion in loans to meet
its external financial needs for the fiscal year 2024-25. This effort is part
of a broader $7 billion Extended Fund Facility (EFF) that is still awaiting
approval from the International Monetary Fund (IMF).
According to media reports, Finance
Minister Muhammad Aurangzeb, alongside Minister of State for Finance, Revenue,
and Power Ali Pervaiz Malik, Finance Secretary Imdadullah Bosal, and Additional
Secretary Sara Najeeb, held a virtual meeting with Dr. Adnan Chilwan, Group CEO
of Dubai Islamic Bank. The discussions centered on Pakistan's economic outlook
and potential investment opportunities.
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A similar meeting was conducted with
Mashreq Bank President and GCEO Ahmed Abdelaal, focusing on economic
cooperation and exploring investment avenues in Pakistan.
The finance minister extended an
invitation to Dubai Islamic Bank to increase its investments in Pakistan and
reiterated the government’s commitment to maintaining macroeconomic stability
and facilitating foreign investment.
Following these discussions, finance
ministry officials are scheduled to meet with foreign bankers next week to
finalize loan amounts and interest rates.
Finance Minister Aurangzeb
previously revealed that Pakistan received a commercial loan offer from a
European bank but was awaiting IMF board approval to secure more favorable
interest rates. The European bank had offered double-digit interest rates, which
were deemed politically and economically unfeasible.
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However, the IMF recently postponed
the approval of the $7 billion EFF after Pakistan failed to secure an
additional $2 billion in financing and the rollover of $12 billion in cash
deposits from Saudi Arabia, China, and the UAE. The finance minister now hopes
for IMF approval in September.
Despite these delays, Pakistan’s
foreign exchange reserves stand at $9.3 billion, boosted by significant
purchases from the domestic market by the central bank.
Sources indicate that Dubai Islamic
Bank has expressed interest in providing syndicated financing to Pakistan. The
bank also referenced the IMF program, as foreign lenders closely monitor the
IMF's support for Pakistan.
Minister Aurangzeb mentioned that
commercial borrowing from the Middle East, which had slowed due to declining
credit ratings, is expected to resume soon. Pakistan has projected about $20
billion in foreign borrowing for the current fiscal year, including a $3
billion rollover from the UAE to support its balance of payments. The country
aims to raise $4 billion through foreign commercial borrowing and an additional
$1 billion through international bonds.
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long-term rating improved to ‘CCC+’
During his interaction with Dr.
Chilwan, the finance minister detailed Pakistan’s economic progress, including
efforts to stabilize the economy, expand the tax base, digitalize the Federal
Board of Revenue (FBR), and reform state-owned enterprises.
Dr. Chilwan reaffirmed Dubai Islamic
Bank’s strategic interest in Pakistan, expressing the bank’s commitment to
supporting the country’s financial growth, particularly in Islamic banking,
infrastructure, and SME development.
Pakistan’s current credit rating
stands at CCC+, below investment grade, leading to higher interest rate demands
from commercial banks. However, the finance minister remains optimistic that
international credit rating agencies may upgrade Pakistan to investment grade
by the next fiscal year.
Source: Profit Pakistan