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India
Pakistan has secured a $1 billion loan agreement with two West Asian banks, marking a critical step in its efforts to stabilize its finances. Finance Minister Muhammad Aurangzeb revealed the terms of the deal in an interview at the World Economic Forum annual meeting in Davos, Switzerland, on Tuesday. The loan, which has an interest rate ranging between 6% and 7%, is set for a short-term period, typically lasting up to one year. The deal involves one bilateral loan and one for trade finance, which will provide immediate relief to the country’s economic challenges.
This loan agreement comes as Pakistan strives to strengthen its financial position after securing a $7 billion bailout from the International Monetary Fund (IMF) in September 2024. The country is gearing up for the first formal review of the IMF Extended Fund Facility (EFF) in late February 2025, and the loan from the West Asian banks will serve as a crucial supplement to the ongoing recovery efforts.
IMF’s EFF program is designed to provide financial support to countries experiencing significant balance of payments issues caused by structural economic weaknesses. In Pakistan’s case, the loan will help provide short-term liquidity as the government works to address long-term fiscal stability. Pakistan’s Finance Minister expressed confidence in the country’s performance for the upcoming review, stating, “We are in good stead for that review.”
This financial boost aligns with Pakistan’s ongoing efforts to mitigate the effects of inflation, address its current account deficit, and stabilize its currency, all while implementing the necessary reforms under the IMF program. With its eyes set on economic recovery, the loan deal from these two banks, coupled with international support, places Pakistan on a path to strengthen its economic fundamentals.
The coming months will be crucial as Pakistan navigates through its economic recovery phase, with the IMF review serving as a key milestone for assessing progress and securing further financial assistance.
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