$3.2bn foreign loans pledges secured

ISLAMABAD: Pakistan has secured a commitment of foreign loans of $3.2 billion from international creditors including Saudi Oil Facility (SOF) of $1.2 billion for the next 12 months, it is learnt.

Pakistan has secured a commitment of $3.2 billion including $1.2 billion from the Kingdom of Saudi Arabia for an oil facility, $1 billion in commercial loans from Dubai Islamic Bank (DIB), $600 million from SCB, and approximately $430 million from Islamic Development Bank’s ITFC facility.

The borrowing plan for financial year 2024-25 placed by the Ministry of Finance revealed that Pakistan was eyeing to fetch $19.274 billion during the current fiscal year. The external inflows of $19.2 billion did not include the borrowing amount secured from the IMF under Extended Fund Facility (EFF).

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

Top sources said that federal secretary finance recently visited Kingdom of Saudi Arabia, but nothing had been signed so far as a result of his visit. He might have discussed the possibilities including the term sheet for finalising Saudi Oil Facility (SOF) of $1.2 billion and Reko Diq deal. This scribe had sent out questions last week to the finance ministry high-ups but got no reply till filing of the report.

The borrowing plan for FY25 reads that the government remains committed to completing all actions associated with multilateral programme loans, which are in pipeline and are projected to be disbursed during the year.

The key multilateral programme loans during FY25 are from ADB which include: (i) Climate and Disaster Resilience Enhancement Programme (sub-program I) amounting to $400m; (ii) Women Inclusive Finance (sub-program II) amounting to $100m; and (iii) Domestic Resource Mobilisation (sub-program II) amounting to $300m.

Furthermore, the government aims to complete all performance and policy actions (PPAs) as agreed upon with the multilateral development partners. The government plans to roll over the bilateral deposits from China amounting to $4bn and Saudi Arabia amounting to $5bn.

For foreign commercial loans, the government aims to refinance the foreign commercial bank loans amounting to around $3.878bn. In addition, a plan is to raise additional $1.2bn as new commercial debt.

The government is eyeing to go to raise around $1bn through issuance of Panda Bonds in the Chinese capital markets and Green Bonds in the international capital markets. There is no maturity of Eurobond or International Sukuk during FY25.

Pakistan is grappling with profound impacts of climate change, such as shifting weather patterns and catastrophic floods. The scale of this climate transition underscores the need for sustainable finance. In this regard, the government aims to establish a sustainable finance framework in order to: (i) Promote sustainable and green financing; (ii) Counter and prevent adverse effects of climate change; (iii) Ensure adherence towards Sustainable Development Goals (SDGs); and (iv) Meet the targets as defined through Nationally Determined Contributions.

For the purpose, the finance ministry is working with the joint sustainability coordinators. With the positive macroeconomic developments and availability of opportune window, a possibility of an inaugural green, social or sustainability bond issuance will be explored during Q4 of FY25.

For Panda Bond, Islamabad plans to carry out maiden issuance of Panda Bond in the Chinese capital markets. For this purpose, China Development Bank, China International Capital Corporation, Habib Bank Limited and Ci+ Bank are acting as joint financial advisors. The plan is to carry out issuance of a Panda Bond with an amount equivalent to US$300 million during FY25. The process for engagement of third-party services i.e., domestic/international legal counsels and rating agencies is already underway.