Pakistan Secures $1 Billion Loan from Two Middle Eastern Banks
- Abeera Marium Siddiqui
- January 22, 2025
- 11:30 am
- 37
- Current Affairs
Pakistan secures $1 Billion Loan from two Middle Eastern banks to strengthen its economy and meet financial goals. The agreements include a bilateral loan and a trade financing arrangement. Both loans carry interest rates of 6-7% and have short-term maturity of one year.
Finance Minister Muhammad Aurangzeb shared this news at the World Economic Forum in Davos. This is part of the government’s larger plan to raise $4 billion from Middle Eastern commercial banks in the next fiscal year. Governor of the State Bank of Pakistan, Jameel Ahmad, confirmed this strategy to boost reserves.
Improving Pakistan’s Credit Ratings
The government aims to improve its credit ratings to a single B grade. Finance Minister Aurangzeb is in talks with major credit rating agencies to achieve this by June 2025.
Currently, Pakistan’s ratings are in the “junk” category. However, progress is visible. Moody’s upgraded Pakistan’s rating to Caa2 in August 2023, citing better macroeconomic indicators. Similarly, Fitch improved the rating to CCC+ in July 2023 after an agreement with the International Monetary Fund (IMF).
Preparing for IMF Review and Climate Financing
Pakistan is preparing for the first review of its $7 billion IMF Extended Fund Facility (EFF) in February 2025. The Finance Minister expressed confidence in meeting all IMF conditions.
The government has also requested $1 billion under the IMF’s Resilience and Sustainability Trust (RST). This program will fund climate-related projects, including clean energy and climate adaptation. Discussions will take place during the February review, with hopes of finalizing it within six to nine months.
Privatization of Pakistan International Airlines (PIA)
The government plans to privatize Pakistan International Airlines (PIA) within the next six months. Last year’s attempt to sell a 60% stake failed due to high debt.
The situation improved after the EU lifted its 4.5-year ban on PIA flights. Services to Europe have resumed, boosting revenue and improving business prospects. This privatization effort is critical for reducing financial losses.
Focus on Financial Reforms and Climate Goals
Pakistan is working to address its economic and environmental challenges. Securing international loans, improving credit ratings, and privatizing debt-ridden entities are key steps. The government is also prioritizing climate financing to support clean energy and resilience projects.
With these reforms, Pakistan aims to improve its financial outlook and build a sustainable future.
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