Pakistan is negotiating with Middle Eastern banks to secure approximately $4 billion in loans necessary to meet its external financial requirements for FY 2024-25.
This effort is part of a broader $7 billion Extended Fund Facility (EFF) awaiting approval from the International Monetary Fund (IMF).
According to media reports, Finance Minister Muhammad Aurangzeb, along with Minister of State for Finance, Revenue and Power Ali Pervaiz Malik, Finance Secretary Imdadullah Bosal, and Additional Secretary Sara Najeeb, held a virtual meeting with Dr. Adnan Chilwan, Group CEO of Dubai Islamic Bank. The discussion focused on the economic outlook and potential investment opportunities in Pakistan.
A similar meeting was conducted on Wednesday with Mashreq Bank President and GCEO Ahmed Abdelaal. Both meetings were organized to discuss economic cooperation and explore avenues for investment in Pakistan.
The finance minister invited Dubai Islamic Bank to enhance its investments in Pakistan and reaffirmed the government’s commitment to maintaining a stable macroeconomic environment and implementing all necessary measures to facilitate foreign investment, according to the finance ministry.
Following these initial meetings, finance ministry officials are scheduled to meet with foreign bankers next week to discuss loan amounts and interest rates.
Aurangzeb had earlier disclosed that the government received a commercial loan offer from a European bank but was awaiting IMF board approval to secure lower interest rates. The European bank had offered double-digit interest rates, which were considered politically and economically unfeasible.
However, the IMF indefinitely postponed the approval of the $7 billion EFF this week after Pakistan failed to secure an additional $2 billion in financing and the rollover of $12 billion in cash deposits from Saudi Arabia, China, and the UAE.
The finance minister now hopes that the IMF may approve the new EFF in September.
Despite the delays, Pakistan’s foreign exchange reserves currently stand at $9.3 billion, bolstered by significant purchases from the domestic market by the central bank.
Sources indicate that Dubai Islamic Bank has expressed interest in providing syndicated financing facilities to Pakistan. The bank also referenced the IMF program, as foreign lenders closely monitor whether the IMF extends its support to Pakistan.
Finance Minister Aurangzeb has stated that commercial borrowing from the Middle East, which had slowed down due to a decline in credit ratings, is expected to resume soon.
Pakistan has projected about $20 billion in foreign borrowing for the current fiscal year, including a $3 billion rollover from the UAE to support its balance of payments. The country aims to raise $4 billion through foreign commercial borrowing and another $1 billion through international bonds.
During the interaction with Dr. Chilwan, the Finance Minister provided a detailed overview of Pakistan’s economic situation, highlighting progress in stabilizing the economy and improving the business environment. He briefed the DIB chairman on key initiatives, including tax base expansion, digitalization of the Federal Board of Revenue (FBR), and ongoing reforms in state-owned enterprises and privatization efforts.
Dr. Chilwan reaffirmed Dubai Islamic Bank’s strategic interest in Pakistan, expressing the bank’s commitment to supporting the country’s financial growth, particularly in Islamic banking, infrastructure, and SME development.
The Finance Minister invited DIB to increase its investments in Pakistan, emphasizing the government’s commitment to maintaining economic stability and facilitating foreign investment.
Pakistan’s current credit rating stands at CCC+, below investment grade, leading to higher interest rate demands from commercial banks. However, the finance minister remains optimistic that international credit rating agencies may upgrade Pakistan to investment grade by the next fiscal year.
