Pakistan gets loan at 11% from London's Standard Chartered Bank
The government of Pakistan has
secured a high-interest loan from a European bank to meet conditions set by the
International Monetary Fund (IMF) as part of its $7 billion loan package.
Despite reaching a staff-level agreement, Pakistan has struggled to secure the
IMF loan due to conditions requiring additional financing from other sources or
the rollover of existing loans.
According to sources, after
unsuccessful attempts to secure further loans from allied nations, Pakistan
obtained a $600 million loan from London’s Standard Chartered Bank at an
interest rate of 11%. This is the highest interest rate on any loan Pakistan
has acquired so far. Of the total loan, $300 million will be allocated for LNG
supply and the remaining $300 million for syndicate financing.
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Initially, the Ministry of Finance
was reluctant to take on this loan due to its high interest, but after
exhausting other options, officials were left with no choice.
In a positive development, friendly
nations have agreed to roll over $12 billion in loans, increasing the chances
of the IMF approving Pakistan’s loan package in its upcoming meeting on
September 25. Julie Kozack, the IMF’s Director of Communications, confirmed
that the IMF Executive Board would meet on that date to discuss Pakistan’s loan
package.
Standard Chartered Bank has a
history of lending to Pakistan, previously extending $1.9 billion between 2017
and 2021 across four instances. The loans were provided at significantly lower
rates, including $700 million in 2017 at a 4.5% interest rate, $200 million in
2019 at 3.25%, and $1 billion at 2.4%.
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In August, Finance Minister Muhammad
Aurangzeb revealed that while foreign commercial banks had offered Pakistan
loans, the government was aiming for lower interest rates following IMF
approval. However, despite slight improvements in Pakistan’s credit rating, the
country is still classified as high-risk by global rating agencies, leaving the
government with limited options for securing loans at lower rates.
Pakistan will continue to face
financial challenges, with $26 billion in annual loan repayments looming,
necessitating additional loans in the coming years.
Source: Minute Mirror