The Multilateral Investment Guarantee Agency (MIGA) is considering a $500 million Trade Finance Guarantee Programme for Pakistan following an upgrade in the country’s credit rating, according to sources in the Commerce Ministry.Â
According to a news report, a high-level MIGA delegation will visit Pakistan from February 19-21, 2025, to discuss the proposed initiative with key government officials. The delegation is scheduled to meet with senior officials, including Economic Affairs Division Secretary Dr. Kazim Niaz, Commerce Secretary Fakhray Alam Irfan, and representatives from the Ministries of Law, National Food Security, National Health Services, Education, and Information Technology.Â
The discussions will focus on trade finance facilitation, as well as Pakistan’s commitment to its international financial obligations. A key issue on the agenda is the Star Hydropower Project, a 147 MW run-of-the-river facility on the Kunhar River, located 120 km northeast of Islamabad. Operated under a 30-year Build-Own-Operate-Transfer (BOOT) scheme, the project is backed by a MIGA guarantee that protects a South Korean investor, KDS Hydro Pte Ltd, from breaches of contract by the Pakistani government.
An arbitration ruling in favor of Star Hydro requires Pakistan to make payment within 21 days. Failure to comply could trigger MIGA’s financial commitment under the guarantee, creating potential liabilities for Pakistan.Â
The Attorney General’s Office has advised the Power Division and the National Transmission and Dispatch Company (NTDC) to negotiate a settlement with Star Hydro to prevent MIGA from intervening.
Recent discussions at the Prime Minister’s Office, along with communications from the World Bank, have underscored the urgency of resolving the dispute. MIGA has indicated its willingness to facilitate negotiations between Pakistan and Star Hydro to mitigate risks associated with the arbitration award and maintain investor confidence in the country’s infrastructure sector.
