Pakistan Halts Costly 11% Loan Eyes Cheaper Funding Sources
As per sources, the finance ministry has decided not to proceed with borrowing from a commercial bank at an 11% interest rate. Prime Minister Shehbaz Sharif reportedly directed the finance minister to avoid taking expensive loans.
Although an agreement had been made with commercial banks for a loan at 11% interest, the government has now decided not to take the funds. In case of a financing gap, loans will be sought from other sources at lower interest rates, the sources aware of the development said.
They further say Pakistan may secure up to $700 million in loans from the International Trade Finance Corporation and the Islamic Development Bank (IDB).
Additionally, $1 billion more is expected from the IMF during the current fiscal year, with a further $2 billion to follow next year.
Pakistan’s 25th IMF programme to be the last, FM Aurangzeb
The IMF is expected to disburse another $2 billion to Pakistan by fiscal year 2027, with the final $1 billion installment arriving in the 37th month of the program. The first economic review under the Extended Fund Facility will take place in March.
This move by the government may violate the commercial bank loan agreement, potentially complicating future loan requests.
Pakistan has availed 25 IMF programs since becoming a member of the International Monetary Fund (IMF) in 1950. The most recent program is a 37-month Extended Fund Facility (EFF) approved in September 2024.
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