In order to get permission for a $7 billion International Monetary Fund (IMF) rescue package, the government concluded the largest commercial loan arrangement in the nation’s history, worth $600 million, at a double-digit interest rate with a European bank.
Reportedly, the Ministry of Finance was unable to secure any further funding from the bilateral sovereign creditors, thus it was forced to pay the highest interest rate it had ever known.
The officials said that the government has approved Standard Chartered Bank’s London term sheet for two loans for a combined $600,000,000. According to them, the nation would have to pay the highest interest rate, which is almost 11%.
Of the entire amount, $300 million has been secured for the delivery of LNG, and an additional $300 million is for syndicated finance.
Pakistan’s maximum interest rate on any international commercial loan is determined by the Secured Overnight Financing Rate (SOFR). At first, the deal’s ramifications for future foreign commercial borrowing made the Ministry of Finance reluctant to move forward with it.
Additionally, efforts were undertaken to get further loans from bilateral creditors; however, authorities reported receiving no favorable response.
The government attempted to steer clear of the costly route, but after discovering that all other options were closed, it was left with little choice.
However, the agreement between the two creditors to roll over cash deposits totaling $12 billion cleared the path for obtaining September 25 as the date for the IMF Executive Board meeting to discuss Pakistan’s case.
Early in August, Finance Minister Muhammad Aurangzeb disclosed that Pakistan had received an offer for a loan from a foreign commercial bank; however, he stated that he would attempt to secure a cheaper interest rate by having the government obtain the loan following ratification of the IMF package.
