Pakistan Cancels $0.5 Billion High-Interest Loan

Pakistan has turned down a $490 million commercial loan offered by the Islamic Development Bank (IsDB) Group since the lender's interest rate was too high, even as the country's gross financing needs remain at around 20 percent of GDP.

Key points

• In September, Pakistan raised $3 billion through Eurobonds, including a five-and-a-half-year bond at 7.5 percent and a 10-year bond at 7.9 percent.
• Under the Finance Ministry's borrowing plan for FY2026-27, total gross financing needs are projected at Rs.
• The decision comes a couple of months after Pakistan took a $300 million loan from United Bank Limited in August.
• The one-year facility was offered by the International Islamic Trade Finance Corporation (ITFC), the IsDB Group's trade finance arm.
• The Debt Management Office (DMO) of the Finance Ministry rejected it last week.

Notably, the one-year facility was offered by the International Islamic Trade Finance Corporation (ITFC), the IsDB Group's trade finance arm.

Meanwhile, the Debt Management Office (DMO) of the Finance Ministry rejected it last week. US Wants More Influence Over Pakistan: Rubio. Why the Loan Was Rejected.

Finance Division was hoping for an interest cost of around 6 percent. The ITFC's all-in cost of regarding 8 percent was additionally higher than Pakistan's December 2027 bond. It was trading at 6.1 percent.

Meanwhile, the administration has now asked the Economic Affairs Division to find a new facility at competitive rates, either from the ITFC or another lender. Financing Needs Stay High.

In practice, the decision comes a couple of months after Pakistan took a $300 million loan from United Bank Limited in August. The administration granted an income tax exemption on the bank's profit to secure it.

Under the Finance Ministry's borrowing plan for FY2026-27, total gross financing needs are projected at Rs. 28.647 trillion, or regarding 20 percent of GDP.

Net external financing is estimated at Rs. 813 billion ($2.8 billion), with multilateral lenders projected to provide most of it.

Meanwhile, the IMF's latest report projects the current account deficit at 1 percent of GDP, or almost $4.5 billion. That is at least $1.5 billion more than the $2.5 billion to $3 billion estimated by Pakistani authorities. Khawaja Asif Mocks Ed Miliband.

Borrowing has additionally become costlier. In September, Pakistan raised $3 billion through Eurobonds, including a five-and-a-half-year bond at 7.5 percent and a 10-year bond at 7.9 percent.

Earlier this year, the country additionally signed three loan agreements worth $603 million with the IsDB. Stay Connected with ProPakistani.

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Taken together, the developments around pakistan Cancels $0.5 Billion High point to a situation that is still moving, and the coming days should bring more clarity.