WEB DESK: Pakistan has finalised agreements for $1 billion in short-term loans with two Middle Eastern financial institutions, Finance Minister Muhammad Aurangzeb announced during the World Economic Forum.
The loans, with an interest rate of 6 -7 per cent and a maturity of up to one year, include a bilateral loan and trade financing arrangement. This move aims to bolster the country’s financial reserves as part of a broader strategy to secure up to $4 billion from Middle Eastern commercial banks by the next fiscal year.
Improved credit ratings on the horizon
Aurangzeb expressed optimism about improving Pakistan’s credit ratings, stating that discussions with rating agencies are underway to achieve a single B rating. The country’s ratings remain in “junk” territory despite recent upgrades. In 2023, Moody’s raised Pakistan’s rating to ‘Caa2,’ citing better macroeconomic conditions, while Fitch improved its rating to CCC+ after an agreement with the International Monetary Fund (IMF).
IMF review and climate financing
Pakistan is preparing for the first review of its $7 billion IMF Extended Fund Facility (EFF), scheduled for late February. Secured in September 2024, the EFF addresses medium-term balance of payments challenges. Aurangzeb expressed confidence in meeting the IMF’s requirements for the review.
The country has also requested $1 billion from the IMF’s Resilience and Sustainability Trust (RST) to fund climate-related initiatives. Discussions on RST financing will progress during the IMF’s February review, with hopes to finalize the arrangement within six to nine months. Highlighting Pakistan’s vulnerability to climate change, Aurangzeb pointed to the Global Climate Risk Index as evidence of the country’s urgent need for adaptation measures.
Efforts to privatise Pakistan International Airlines (PIA) are underway, with Aurangzeb optimistic about resolving the issue within five to six months. The government’s previous attempt to sell a 60 per cent stake in the debt-laden airline failed last year. However, the EU aviation regulator’s recent lifting of a 4.5-year ban has improved PIA’s business prospects, with flights to Europe resuming this month.
This series of developments reflects Pakistan’s multifaceted approach to addressing its economic challenges, with a focus on financial stabilization, climate resilience, and institutional reforms.
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