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Govt Abandons $600 Million Local Bank Loan After IMF Deal
After securing an IMF loan, the Ministry of Finance has canceled plans to borrow $600 million from a local bank. PM Shehbaz Sharif urged the finance minister to focus on the IMF program instead.
ND
by News Desk
2024-10-02
Govt Abandons $600 Million Local Bank Loan After IMF Deal

After securing a loan from the International Monetary Fund (IMF), Pakistan's Ministry of Finance has reversed its decision to take out a costly $600 million commercial loan from a local bank, sources confirmed. The move comes as the government focuses on lowering borrowing costs and adhering to the conditions set by the IMF.

 

Initially, the Ministry of Finance had signed an agreement with a local bank to meet an estimated financing gap, agreeing to a loan at an 11% interest rate. However, with the arrival of IMF funds, the government has chosen not to proceed with this high-interest loan.

 

Sources close to the matter revealed that Prime Minister Shehbaz Sharif intervened, instructing Finance Minister Ishaq Dar to avoid taking expensive loans. The prime minister emphasized that if a financing gap persists, loans should be sourced from other institutions at more favorable rates, ensuring the country remains aligned with the IMF's program.

 

The decision to abandon the loan from the local bank could potentially lead to complications, as it breaches the initial agreement. Experts caution that if the government seeks a loan from the same bank in the future, it may face difficulties due to this breach.

 

In the meantime, the government is looking toward alternative funding options, including potential loans from the International Trade Finance Corporation and the Islamic Development Bank (IDB). Pakistan is expected to receive $1 billion from the IMF this fiscal year, followed by $2 billion in 2025 and an additional $2 billion by 2027. The final installment of $1 billion is set for disbursement in the program’s last month.

 

The first economic review under the IMF’s Extended Fund Facility (EFF) is scheduled for March, where Pakistan’s economic performance and compliance with the IMF’s targets will be assessed.

 

This strategic shift in loan policy reflects the government's effort to stabilize Pakistan's economy while reducing its reliance on expensive borrowing from local banks, following IMF guidelines.
Tagged:

IMF

finance

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PakistanEconomy

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