Pakistan eyes $2.3bn inflows by end of fiscal year

ISLAMABAD: Pakistan is eyeing to fetch two major dollar injections worth $2.3 billion -- $1.3 billion from the IMF and $1 billion as a commercial loan -- before June 30, 2025.

The commercial loan of $1 billion has been negotiated with the Standard Chartered Bank (SCB) at a mark-up of over 7.33 percent, but Islamabad has sought a guarantee from the Asian Development Bank (ADB) for policy credit under the Domestic Resource Mobilisation Programme.

“Without provision of guarantee from the ADB, the interest rate of this commercial loan might have been offered to Pakistan at a rate of 10 to 11 percent but the country has preferred to utilise the resource envelope of ADB to raise a guarantee for a commercial loan for a five-year period. In the past, Pakistan used to raise foreign commercial loans for one-year period,” top official sources confirmed while talking to The News here on Tuesday.

The SCB is likely to disburse the commercial loan within the ongoing financial year till June 30, 2025, at SOFR plus 3 percent mark-up. The SOFR stands for Secured Overnight Financing Rate, a risk-free interest rate benchmark that reflects the cost of borrowing overnight, secured by US Treasury securities. It was developed as an alternative to London Inter-Bank Offered Rates (LIBOR). SOFR is calculated from actual transactions in the Treasury repo market and is published by the Federal Reserve Bank of New York. The SOFR stands at 4.33 percent at the moment. The ADB’s Board is tentatively scheduled to consider approval of this guarantee of $500 million on May 28, 2025. Both sides -- Pakistan and the ADB staff -- have already negotiated this proposed deal, and a formal request from Pakistan has been in the process of being forwarded to the ADB’s Board soon.

The ADB’s policy loan of $1 billion was meant for Pakistan in its resource envelope, out of which half of the amount of $500 million is expected to be utilised for the provision of a guarantee for raising this commercial loan of $1 billion from the SCB.

The IMF’s Executive Board is scheduled to meet in Washington, DC, on May 9 to consider Pakistan’s first review under the Extended Fund Facility. It is expected that Pakistan will receive $1 billion under the EFF installment and another $200 to $300 million through first tranche of RSF. This financial injection of $2.2 to $2.3 billion in the current fiscal year will jack up dwindling foreign exchange reserves held by the SBP.

Total liquid foreign reserves held by the country stood at $15.4 billion as of 18-Apr-2025.