Pakistan has reached an agreement with Standard Chartered Bank and Dubai Islamic Bank (DIB) for a $1 billion loan, with disbursement expected in the second half of June. The deal is contingent upon a $500 million guarantee from the Asian Development Bank (ADB), which is set to be approved by the ADB board on May 28, according to a report by Express Tribune.
The loan will carry a floating interest rate, pegged to the Secured Overnight Financing Rate (SOFR) plus 3.25 percent, amounting to an effective rate of around 7.6 percent. The ADB will charge a nominal upfront fee for providing the partial guarantee.
This agreement comes after Pakistan previously declined a $600 million loan from Standard Chartered due to an unfavorable 11 percent interest rate, driven by adverse market conditions at the time.
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In the current fiscal year, Pakistan had allocated $3.8 billion in the budget for foreign commercial borrowing but has only managed to raise $500 million so far.
Pakistan’s overall external financing plan for the year totals $23.4 billion, which includes $13 billion in rollovers from partner nations such as China, Saudi Arabia, the UAE, and Kuwait. The country has already repaid a $1.3 billion commercial loan to China, with an understanding for short-term refinancing.
This new agreement, backed by the ADB, is expected to provide crucial support to Pakistan’s ongoing efforts to stabilize its external financing and meet international financial commitments.
