Pakistan locks $1bn syndicated loan under ADB-supported reform plan

A $1 billion syndicated term finance facility has been signed by the Ministry of Finance, with partial backing from the ADB’s policy-based guarantee tied to its “Improved Resource Mobilisation & Utilisation Reform” programme.

Dubai Islamic Bank acted as the Sole Islamic Global Coordinator, while Standard Chartered Bank acted as the Mandated Lead Arranger and Bookrunner, according to a press release issued by the ministry.

Other financiers include Abu Dhabi Islamic Bank as the Mandated Lead Arranger, and Sharjah Islamic Bank, Ajman Bank, and HBL as Arrangers.

A five-year, multi-tranche facility including both Islamic and conventional tranches is a landmark transaction for Pakistan that demonstrates strong support from leading financiers in the region, the ministry said.

The Islamic facility was structured to be fully compliant with AAOIFI standards and accounts for 89% of the total financing amount. The remaining 11% is from conventional financing.

The transaction is also the first facility supported by ADB’s Policy-Based Guarantee linked to policy reform measures undertaken by an ADB member country, i.e., Pakistan.

The ADB programme is designed to support Pakistan in building long-term fiscal resilience and stability and has supported Pakistan’s re-entry into international commercial markets, with significant interest from Middle Eastern banks.

The Government of Pakistan has entered the Middle Eastern financial market after nearly two and a half years — a success that indicates renewed market trust in Pakistan’s fiscal stability and overall improvement in macroeconomic indicators.

This transaction also marks the beginning of a new partnership between the Government of Pakistan and Middle Eastern banks.

Earlier this month, the ADB approved an $800 million financing package to support Pakistan’s push for fiscal sustainability and stronger public financial management, amid mounting debt and reform pressures.

The aforementioned package includes a $300 million policy-based loan and ADB’s first-ever policy-based guarantee of up to $500 million, aimed at mobilising as much as $1 billion from commercial lenders, the Philippines-based lender said in a statement on June 3.

The funding comes under the Improved Resource Mobilisation and Utilisation Reform Program, Subprogram 2, which supports wide-ranging fiscal and governance reforms. 

These include overhauls in tax policy and administration, public expenditure management and digital governance — all part of Islamabad’s efforts to contain the fiscal deficit and reduce public debt.

“Pakistan has made significant progress in improving macroeconomic conditions,” said ADB Country Director Emma Fan. “This programme backs the government’s commitment to further policy and institutional reforms that will strengthen public finances and promote sustainable growth.”