Pakistan has reached a tentative agreement with two foreign commercial banks, Standard Chartered Bank (SCB) and Dubai Islamic Bank (DIB), to secure a $1 billion loan, supported by a guarantee from the Asian Development Bank (ADB), The Express Tribune reported.
The loan will be acquired at an interest rate of approximately 7.6%, based on the Secured Overnight Financing Rate (SOFR) plus a 3.25% margin.
However, the final terms, including the disbursement of funds, depend on the approval of a $500 million guarantee from the ADB, which is expected on May 28, 2025.
According to finance ministry officials, the loan will have a five-year tenure, which aims to reduce refinancing risks for Pakistan. This marks the first time the country has secured a foreign commercial loan with such a duration.
With the ADB guarantee, Pakistan can borrow up to $1.5 billion, providing a crucial boost to its foreign exchange reserves, which currently stand at $10.6 billion.
The government aims to raise its reserves to over $14 billion by the end of June, bolstered by improved remittances, the new commercial loan, and a refinancing agreement for Chinese loans amounting to $1.3 billion.
The new loan agreement is a significant step for Pakistan, as its credit rating remains low at B-negative, two notches below investment grade, despite a recent upgrade.
The country’s financial situation has improved, with projections of a reduced current account deficit, and negotiations with Moody’s have focused on the country’s fiscal surpluses, declining inflation, and stable foreign reserves. Moody’s is expected to reassess Pakistan’s rating in early May.
While the loan is still subject to ADB approval, the government anticipates that it will be disbursed in the second half of June, which will provide a timely boost to Pakistan’s foreign exchange reserves before the close of the fiscal year.
