The Pakistani government is reportedly planning to secure an additional $4.9 billion in loans from international commercial banks to bolster its foreign exchange reserves and meet its external financing obligations. This move follows the International Monetary Fund’s (IMF) recent approval of a $1 billion bailout for the cash-strapped South Asian nation.
Acquiring new loans
According to reports from ARY News, Islamabad’s strategy involves acquiring $2.64 billion in short-term loans from international commercial banks, anticipating annual interest rates between 7% and 8%. These loans are reportedly being sought without stringent conditions or performance benchmarks. Additionally, the government is looking for $2.27 billion through long-term borrowing arrangements with commercial banks.
Sources indicate that Pakistan is in discussions with four major international banks for these funds. This includes a proposed $1.1 billion from the Industrial and Commercial Bank of China (ICBC), along with $500 million each from Standard Chartered Bank and Dubai Islamic Bank. Furthermore, Pakistan is reportedly seeking a commercial guarantee for a $500 million loan from the Asian Development Bank (ADB), as per a report by news agency ANI.
This fresh round of borrowing is crucial for Pakistan to manage its significant debt repayment obligations and navigate limited access to global capital markets. The additional funds are also intended to strengthen the country’s foreign exchange reserves. The IMF has set a target for Pakistan to reach $13.9 billion in reserves by the end of June. Currently, the State Bank of Pakistan holds approximately $14 billion, sufficient to cover three months of imports.
Economic Growth Falls Short of Target
Adding to the economic challenges, the Pakistani federal government has reportedly missed its economic growth target for the fiscal year 2024-25. According to ARY News, citing sources from Pakistan’s National Accounts Committee, the country achieved a growth rate of just 2.68% against a projected 3.6%.
This revelation emerged during a National Accounts Committee meeting in Islamabad, chaired by the Secretary Planning. The report noted that Pakistan’s economic output reached $411 billion, with per capita income increasing to $1,824.
Sector-wise performance during the first three quarters of the fiscal year showed varied results. Agriculture grew by 1.8%, while the industrial sector experienced a decline of 1.14%. In contrast, the services sector demonstrated robust growth of 39% between July and March, as per ARY News.
