The International Finance Corporation (IFC), Standard Chartered Bank Pakistan, and Engro Fertilizers have collaborated on a financing arrangement designed to mobilize long-term local lending for Pakistan’s agriculture sector.
The deal involves an unfunded partial credit guarantee of up to PKR 33.6 billion from IFC, which reduces credit risk for Standard Chartered as it provides long-tenor rupee financing to Engro. This innovative mechanism aims to lower borrowing costs for Engro, which will use the funds for capital expenditures, including plant maintenance, and ensure stability in urea supply during peak agricultural demand.
The arrangement is significant as it marks IFC’s first local-currency investment in Pakistan, allowing Engro to secure long-term financing without the need for foreign-currency debt, a key benefit given the current volatility in exchange rates and external financing conditions. The financing structure is also supported by the IFC-Canada Facility for Resilient Food Systems, which absorbs initial risk, making the arrangement more attractive to commercial lenders.
While the deal does not address broader structural issues in Pakistan’s agriculture, such as inefficient logistics or low productivity, it demonstrates the potential of risk-sharing tools to attract domestic capital for long-term infrastructure investment. Market analysts expect similar financing models to become more common as local-currency financing gains favor over foreign debt in the current macroeconomic climate.
