Here’s How International Lenders Are Making Billions from Pakistan

International banks like the China Exim Bank and the International Islamic Trade Finance Corporation (ITFC) are charging up to 6.5 percent interest per annum on lending to Pakistan while loans from Italy and China Development Bank are interest-free.

According to the official record on the terms and conditions of the donors’ lendings available with ProPakistani, Japan International Cooperation Agency (JICA) and Korea International Cooperation Agency (KOICA) are charging 0.10 percent and 0.1 percent respectively on their loans to Pakistan.

The International Islamic Trade Finance Corporation (ITFC), which is a subsidiary organ of the Islamic Development Bank (IsDB), has charged five to six percent per annum on its short-term trade financing (Murabaha). The repayment schedule and maturity period of the ITFC loan was one year, and there are no commitment charges, no service charges, and no penalty if it is not paid on time.

Additionally, four to 4.25 percent per annum is being charged on Turkish lending and there are commitment charges of 0.50 percent. There is also no grace period for the Turkish loan, no service charge, and no penalty if it is not paid on time. Also, the repayment schedule and maturity period of the Turkish loan are 10 to 14 years.

The China EXIM bank is providing a government concessional loan (GCL) at two percent interest, with a 5-7 year grace period, with management fee and commitment charges of 0.20 percent each. The repayment and maturity period of the lending is 15-20 years. The China EXIM bank offers a preferential Buyer Credit at two to three percent interest with the grace period of five to seven years, with the management fee and commitment charges of 0.20 percent each. The repayment and maturity period of the lending is 15 to 20 years.

The China EXIM bank is also providing Buyer Credit at Libore+220 t0 350 basis points (bps) or fixed 6.5 percent per annum, with a grace period of five to seven years. The lending has a management fee of 0.75 percent and commitment charges of 0.50 percent. The repayment and maturity period of the lending is 15-20 years.

Asian Infrastructure & Investment Bank (AIIB) is providing loans at 0.7 percent to 1.40 percent, depending on the tenure with a grace period of 5-7 years. The loan has a management fee and commitment charges of 0.25 percent each. The repayment and maturity period of lending is eight to twenty years.

Similarly, the International Fund for Agricultural Development (IFAD) is providing blend terms loan at 1.25 percent per annum with a grace period of five years. The repayment schedule and maturity period of the lending is 25 years (including five years grace period). The service charge for the loan is 0.75 percent.

The Islamic Development Bank(IDB) is providing project financing long-term loans (Istisna and Ijara) at an interest rate of three to four per annum, with a grace period of five years. The repayment schedule and maturity period of the lending is 15 years.

The  Kuwait Fund is charging 1.5 percent to 2.5 percent on the loan having a grace period of six years. The loan also has an additional charge of 0.5 percent and a special commitment of 0.5 percent. The repayment schedule (maturity period) of the loan is 20 years.

The Saudi Fund is charging a two percent interest rate with a grace period of five years. The repayment and maturity period of the lending is 20 years with a two percent penalty if it is not repaid on time.

France/AFD is providing lending on six-month Euribor plus 48-125bp, with a three to seven year grace period. The repayment and maturity period of the lending is 15-30 years. As a penalty, late repayment interest will accrue without any formal notice from the lender within the limits permitted by law on interest overdue for one year or more at the interest rate applicable to the relevant interest period (late-payment interest) plus 3.5 percent (Default Interest).

The OPEC Fund for International Development (OFID) is providing project financing long-term loans at 1.7 percent per annum with a grace period of five years. The lending has commitment charges of one percent and it has a repayment and maturity period of 15 years.

Korea is charging 0.1 percent interest on its lending with a grace period of 10 years, with no commitment charge. The repayment schedule (maturity period) of the loan is 30 years and will charge a two percent penalty per annum if not repaid on time.

The Asian Development Bank (ADB) is providing Market Based Lending (MOL) of LIBOR six month+50 basis points, with a grace period of five years and 0.15 percent commitment charges on an undisbursed amount. The repayment schedule and maturity period of the loan is 25 years (including the grace period of 5 years). The ADB will also provide Concessional OCR lending(COL) at two percent per annum with a five-year grace period and 0.15 percent commitment charges on the undisbursed amounts. The repayment schedule and maturity period of the loan is 25 years (including the grace period of five years).

The Japan International Cooperation Agency (JICA) provides concessional loans to Pakistan at 1.30 percent, with a 10-year grace period and charging 0.10 percent commitment charges. The repayment schedule (maturity period) of the loan has 30 years (including a grace period of 10 years) and 0.1 percent service charges.

The JICA is providing a STEP loan at 0.10 percent with 10 years grace period and charging 0.10 percent commitment charges. The repayment schedule (maturity period) of the loan has 40 years (including a grace period of 10 years) and 0.1 percent service charges.

The World Bank (WB) is providing IDA loans, IDA(SUF) loans, and IBRD loans. It charges 1.25 percent for IDAs, with a five-year grace period and 0 to 0.5 percent commitment charges (currently set at zero percent). The repayment schedule (maturity period) of the loan is 25 years (including a five-year grace period). Additionally, the service charge is 0.75 percent.

The WB charges LIBOR+1.65 percent (maximum) for the IDA (SUF) loan, with a five-year grace period and 0 to 0.5 percent commitment charges (currently set at zero percent). The repayment schedule (maturity period) of the loan is 25 years (including 5 years grace period). For the IBRD loan, it charges LIBOR+1.65 percent (maximum), with a five-year grace period and 0 to 0.5 percent commitment charges. The repayment schedule (maturity period) of the loan is 30 years.

The Germany-KfW lending interest rate is 0.75 percent, with a grace period of six years. The loan has commitment charges of 0.25 percent, and its maturity period is 38 years. For the penalty, if not paid on time, the KfW may increase the rate of interest on arrears to the base rate plus three percent per annum for the period beginning with the assigned due date.



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