Pakistan has successfully secured $1 billion in loans from two Middle Eastern financial institutions, according to Finance Minister Muhammad Aurangzeb.
This new financing arrangement, which includes bilateral and trade financing agreements, comes at an interest rate of 6%-7%. The terms, which feature repayment periods of up to one year, are part of Pakistan’s broader strategy to bolster its financial position following the $7 billion Extended Fund Facility (EFF) secured from the International Monetary Fund (IMF) in September 2024.
During an interview at the World Economic Forum (WEF) in Davos, Aurangzeb revealed that these loans would provide critical short-term relief as Pakistan continues its efforts to stabilize its economy.
“With two institutions we have now gone forward in signing up the term sheet – one bilateral and one for trade (finance),” he said. The loans come as part of Pakistan’s ongoing attempts to address its fiscal health, which has been under strain due to challenges such as a depreciating currency and rising external debt.
These loans, which are expected to offer temporary relief, will support Pakistan’s financial recovery efforts as the country navigates a challenging economic environment. The $7 billion IMF bailout is central to this recovery, aimed at addressing Pakistan’s medium-term balance-of-payment challenges and structural weaknesses. The IMF’s first review under this program is scheduled for February 2025.
Expressing confidence in the country’s progress under the IMF framework, Finance Minister Aurangzeb stated, “I do think we are in good stead for that review.”
In addition to this, Pakistan has also received a major boost from the World Bank, which pledged to lend $20 billion over the next decade starting in 2026 under its Country Partnership Framework. This initiative will support key sectors including child nutrition, education, clean energy, and climate resilience, all aimed at fostering private sector growth in Pakistan. Prime Minister Shehbaz Sharif welcomed the World Bank’s commitment, calling it a “first-ever” pledge of its kind. He expressed optimism about the program’s potential to help address Pakistan’s pressing development challenges.
“This reflects the World Bank’s confidence in Pakistan’s economic resilience and potential,” Sharif stated on social media. “We look forward to strengthening our partnership as we align our efforts for creating lasting opportunities for our people.”
Pakistan’s economic situation remains precarious as the nation faces a mix of political instability, rising militant attacks, and the aftereffects of devastating flooding in 2022. However, these new loan agreements and international support offer some hope of relief as the country seeks to stabilize its economy.