Pakistan okays terms for $1bn loans with two Middle Eastern banks: FinMin
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Finance Minister Muhammad Aurangzeb speaks during an interview with Reuters at his office in Islamabad, Pakistan July 19, 2024. — Reuters/File
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As the South Asian country looks for more financing, Finance Minister Muhammad Aurangzeb said on Tuesday that Pakistan has agreed terms with two Middle Eastern banks for a $1 billion loan at 6%-7% interest rates. .
“We have gone ahead with signing the term sheet now with two institutions – one bilateral and one for trade. [finance]Aurangzeb said during an interview with Reuters on the sidelines of the annual meeting of the World Economic Forum in Davos.
Aurangzeb added that the loans were short-term – or up to a year.
The finance minister is in Davos to attend the WEF annual meeting between January 20 and 25. World leaders will address key global and regional challenges at the annual meeting in 2025.
The meeting will focus on responding to geopolitical shocks, fostering growth to improve living standards, and a just and inclusive energy transition.
Pakistan aims to shore up its finances after receiving a $7 billion bailout from the International Monetary Fund (IMF) in September 2024, with the first review scheduled for late February.
“We have the first official review of the EFF coming by the end of February,” Aurangzeb said. “I think we’re in a good place for that review.”
IMF Extended Fund Facilities (EFFs) provide financial assistance to countries facing serious medium-term balance of payments problems resulting from structural weaknesses that require time to resolve. is
Aurangzeb invited global stakeholders.
In a special article published as part of the annual meeting of the World Economic Forum (WEF), Finance Minister Aurangzeb invited global stakeholders to focus on priority sectors such as agriculture, information technology (IT), renewable energy and Contribute to Pakistan’s journey by investing in pharmaceutical sectors. “
state news agency APP reported on Tuesday.
“Faced with formidable challenges, we implemented decisive reforms to create a strong foundation for sustainable and inclusive growth. Today, the results of these efforts are becoming evident, with the economy demonstrating resilience and resilience, ” he says.
Asked about the series of economic reforms, he said: “When I took over as finance minister in 2024, Pakistan faced severe financial and fiscal stress and inflation rose to 38 percent, putting pressure on households and Purchasing power decreased.”
Aurangzeb said foreign exchange reserves had dwindled to an alarming level, barely enough to cover two weeks of essential imports such as food and fuel, and industrial production had fallen by 10.3 percent, and GDP growth to 0.2 percent. has fallen
The compounding effects of COVID-19 and devastating flooding further tested our resilience, causing more than $30 billion in damage.
Recognizing the gravity of the situation, “We implemented a series of necessary reforms and these included stabilizing the exchange rate, tightening monetary policies, and curbing inflation through targeted monetary interventions.
‘Iran Pakistan’
With the IMF’s $7 billion EFF assistance, the government embarked on structural reforms in key sectors such as energy and taxation. Central to this effort was “Iran Pakistan”, an economic transformation plan launched in 2024.
He said the initiative aims to achieve sustainable, export-led GDP growth of 6 percent by 2028 through public-private partnership, increase export competitiveness and better public finances and priority sectors in agriculture, energy, textiles, Pharmaceuticals and IT are included.
The finance minister said that a key component of ‘Oran Pakistan’ is our collaboration with the World Bank on a $20 billion initiative targeting health, education, poverty alleviation, investment and climate resilience.
He said this transformative partnership addresses key challenges such as child malnutrition, educational outcomes and clean energy adoption.
By integrating sustainability into our development framework, “we contribute to global efforts to achieve the United Nations’ Sustainable Development Goals (SDGs). are contributing,” he said.
In July 2024, we introduced a reform-oriented budget with an ambitious target of raising Rs 13 trillion in revenue, which is 40 per cent more than the previous year, the minister said.
He said the reforms focus on broadening the tax base by targeting low-tax sectors like agriculture, real estate and trade, while leveraging technology to enhance compliance and transparency.
Modernization of the Federal Board of Revenue (FBR) is playing an important role in streamlining tax administration.
Talking about the current economic challenges, he said that despite significant achievements, challenges remain and to break free from external aid cycles, Pakistan needs to address structural inefficiencies in revenue collection, energy, state-owned enterprises (SOEs) and privatization. removing
He said that decentralization of the federal government, reform of SOEs, and promotion of export-led growth would strengthen domestic revenue streams and reduce dependence on international funding programs.
The minister said that the global stakeholders are encouraged to invest in Special Economic Zones (SEZs) in priority sectors such as agriculture, IT, renewable energy, mining and minerals, textiles and apparels, pharmaceuticals during the visit to Pakistan. Cooperation is invited.
He said that Pakistan’s innovative approaches to taxation and economic stability offer valuable lessons for other developing economies and that partnerships in climate resilience and sustainable development are critical to advancing common global goals.
