Pakistan 'decides' against taking loan from commercial bank at 11% interest rate

ISLAMABAD: Pakistan has ‘decided’ against taking loans from commercial bank at higher interest rate, ARY News reported on Wednesday, citing sources.

As per sources, the finance ministry has decided not to proceed with borrowing from a commercial bank at an 11% interest rate. Prime Minister Shehbaz Sharif reportedly directed the finance minister to avoid taking expensive loans.

Although an agreement had been made with commercial banks for a loan at 11% interest, the government has now decided not to take the funds. In case of a financing gap, loans will be sought from other sources at lower interest rates, the sources aware about the development said.

They further say Pakistan may secure up to $700 million in loans from the International Trade Finance Corporation and the Islamic Development Bank (IDB).

Additionally, $1 billion more is expected from the IMF during the current fiscal year, with a further $2 billion to follow next year.

Read more: Pakistan’s 25th IMF programme to be the last, FM Aurangzeb

The IMF is expected to disburse another $2 billion to Pakistan by fiscal year 2027, with the final $1 billion installment arriving in the 37th month of the program. The first economic review under the Extended Fund Facility will take place in March.

This move by the government may violate the commercial bank loan agreement, potentially complicating future loan requests.

Pakistan has availed 25 IMF programmes since becoming a member of the International Monetary Fund (IMF) in 1950. The most recent programme is a 37-month Extended Fund Facility (EFF) approved in September 2024.