Pakistan secured a $1 billion loan from two Middle Eastern banks: FinMin Aurangzeb

DAVOS (Web Desk) Finance Minister Muhammad Aurangzeb stated on Tuesday that Pakistan has finalized terms for a $1 billion loan from two Middle Eastern banks.

The loans, which have an interest rate of 6 to 7 percent, include a bilateral agreement and a trade finance arrangement, both with short terms of up to a year.

Aurangzeb acknowledged the agreement in an interview at the World Economic Forum’s annual gathering in Davos.

The loan is part of Pakistan’s larger aim to raise $4 billion from Middle Eastern commercial banks by the following fiscal year, according to State Bank of Pakistan Governor Jameel Ahmad.

Aurangzeb expressed optimism about the country’s financial prospects and announced plans to work with credit rating agencies to improve to a single B rating. “Ideally, I would like to see some action on this front before our fiscal year ends in June,” he told me.

Pakistan, which is now classified in “junk” status, has witnessed just minimal improvements this year. Moody’s lifted the country’s credit rating to Caa2 in August, citing improving macroeconomic conditions, while Fitch boosted it to CCC+ in July, after an International Monetary Fund (IMF) staff-level agreement.

Pakistan’s financial stability measures are supported by a $7 billion IMF (EFF) loan secured in September 2024. The first evaluation under the program is scheduled for late February 2025, and Aurangzeb feels confident in completing its standards.

In addition, the government has requested $1 billion from the IMF’s Resilience and Sustainability Trust (RST) to finance climate programs. Discussions are anticipated to continue during the forthcoming IMF visit. “I’m hopeful we can finalize this within the next six to nine months,” Aurangzeb told reporters.

The declaration demonstrates Pakistan’s will to overcome its financial issues and improve its economic status on the world stage.