- Saudi Arabia promises $1.2 oil facility to Islamabad.
- Dubai Islamic Bank commits to providing $1 billion.
- The Islamic Development Bank and the Asian Development Bank pledged $600 million and $430 million, respectively.
ISLAMABAD: Amid efforts by the Prime Minister Shehbaz Sharif-led government to address various challenges on the economic front, the administration has secured foreign loan commitment worth $3.2 billion from international creditors including the Saudi Oil Facility (SOF) worth $1.2 billion over the course of the The next 12 years. months, News reported on Tuesday.
The loan commitments include a $1.2 billion loan facility pledged by Saudi Arabia, $1 billion in commercial loans from Dubai Islamic Bank, $600 million from Sharjah Commercial Bank, and approximately $430 million from facilities from the International Islamic Trade Finance Corporation of the Islamic Development Bank.
This development comes after the IMF Executive Board approved last month a new loan program worth $7 billion, which was then followed by the first tranche of $1.03 billion (SDR 760 million) disbursed to Islamabad.
The borrowing plan for the fiscal year 2024-25 drawn up by the Ministry of Finance revealed that Pakistan is looking to bring in $19.274 billion during the current fiscal year. External flows of $19.2 billion did not include the amount of borrowing guaranteed by the International Monetary Fund under the Extended Fund Facility.
Pakistan is expected to receive $4.56 billion from multilateral creditors including the World Bank, Asian Development Bank, Islamic Development Bank, Asian Infrastructure Investment Bank (AIIB), bilateral $9.4 billion, commercial banks $3.779 billion, and international bonds $1 billion. , Naya Pakistan Certificate $0.5. one billion.
Senior sources said that the Federal Minister of Finance recently visited Saudi Arabia, but nothing has been signed yet as a result of his visit.
He may have discussed possibilities including a term sheet to finalize the $1.2 billion Saudi Oil Facility (SOF) and the Reco Deck deal. This writer sent questions last week to senior officials in the Ministry of Finance but did not receive any response until the report was submitted.
The FY2025 borrowing plan states that the government remains committed to completing all actions related to the multilateral program loans, which are in preparation and expected to be disbursed during the year.
Key multilateral program loans during FY2025 come from the Asian Development Bank and include: (i) the Climate Change and Disaster Resilience Program (Subprogramme I) of $400 million; (2) Inclusive financing for women (subprogramme II) in the amount of $100 million; (3) Domestic resource mobilization (subprogramme II) worth $300 million.
Furthermore, the government aims to complete all performance and policy measures as agreed with multilateral development partners. The government plans to replenish bilateral deposits from China amounting to $4 billion and Saudi Arabia amounting to $5 billion.
As for foreign commercial loans, the government aims to refinance foreign commercial bank loans amounting to approximately $3.878 billion. In addition, there is a plan to raise an additional $1.2 billion in new commercial debt.
The government is looking to raise about $1 billion by issuing panda bonds in Chinese capital markets and green bonds in global capital markets. There are no maturity dates for European bonds or international instruments during fiscal year 2025.
Pakistan faces the profound impacts of climate change, such as changing weather patterns and catastrophic floods. The scale of this climate shift underscores the need for sustainable financing.
In this regard, the government aims to establish a sustainable financing framework to: (1) promote sustainable and green financing; (2) combat and prevent the harmful effects of climate change; (3) Ensuring adherence to the Sustainable Development Goals; and (4) achieving the objectives as set through the Nationally Determined Contributions.
For this purpose, the Ministry of Finance is working with joint sustainability coordinators. With positive macroeconomic developments and the right opportunity, the possibility of issuing green, social or sustainable bonds will be explored during Q4 FY25.
As for panda bonds, Islamabad plans to implement the first issuance of panda bonds in 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 implement a Panda bond issuance of $300 million equivalent during FY25. The process of engaging third party services, such as local/international legal advisors and rating agencies, is already underway.