Pakistan has decided to secure a $600 million short-term loan from Standard Chartered Bank to support its foreign exchange reserves, as expected inflows from commercial borrowing and bonds remain below targets.
The facility, arranged through Standard Chartered Bank in London, will have a tenure of six to nine months and is expected to be finalized shortly, according to Tribune.
The loan will primarily be used to finance imports of crude oil and gas, providing temporary support to the country’s external account position.
The borrowing comes at an interest rate of around 6.3 percent, based on the Secured Overnight Financing Rate plus 2.6 percent.
This cost is slightly lower than the rate Pakistan is currently paying on $3.5 billion in deposits from the United Arab Emirates, for which the government has sought a reduction. For the current fiscal year, Pakistan had budgeted $3.1 billion in foreign commercial loans, but has received only $54 million during the first half of the year.
At the same time, the country recently repaid a $700 million loan to the China Development Bank, which reduced foreign exchange reserves to around $15.5 billion as of February 10.
Officials expect the loan to be refinanced later this year, along with another $1 billion commercial facility. Efforts to raise funds through international capital markets have also faced delays. The government had planned to raise $400 million through sovereign bonds and $250 million through Panda bonds, but no transactions have been completed so far.
Overall, Pakistan has received $5.7 billion out of the $26 billion in external financing planned for the current fiscal year, highlighting a significant gap.
Foreign direct investment has also declined by over 41 percent to $981 million during the first seven months of the fiscal year, while exports have fallen by 7 percent during the same period.
The government aims to raise foreign exchange reserves to above $18 billion by June, relying on improved remittances, fresh borrowing, and continued support from friendly countries including the UAE, Saudi Arabia, and China.
If the economy is so great why is govt begging for loan from banks
Form 47 constantly begging for loan on the side claim Pakistan economy is rising.