Pakistan Govt Secures $300 Million Loan from UBL

Pakistan government has secured a $300 million commercial loan from United Bank Limited (UBL) to strengthen the country’s financial position. UBL arranged the loan with financial backing from Gulf countries. The facility is split into two parts: a $250 million loan at a 7.2% interest rate (SOFR + 3%) and a $50 million loan at a 7.7% interest rate (SOFR + 3.5%). Both loans are set to be repaid within a year.

Lower-Cost Loans

This new loan arrangement marks a shift from previous borrowing terms. The rates are significantly lower than the 8.5% rate Pakistan agreed to in September for a $200 million loan from the Bank of China. Officials believe this deal will encourage other financial institutions to offer loans at better rates. The Ministry of Finance may seek an additional $100 million under the same facility, according to senior officials.

Breaking Dependence on Chinese Financing

This is Pakistan’s first non-Chinese foreign loan since fiscal year 2022. Previous financial support from Gulf and European banks had dried up due to Pakistan’s declining credit rating and a looming default risk. UBL’s intervention could pave the way for more lenders to return, offering the government a broader range of borrowing options.

Pakistan Govt Secures $300 Million Loan Amid External Financing Gap

Pakistan faces a $2.5 billion external financing gap identified by the IMF. The government’s $12 billion in foreign exchange reserves cover only 2.6 months of imports. Finance Minister Muhammad Aurangzeb remains optimistic, claiming the external financing gap is “fully covered” and that future loans will be secured at competitive rates.

With $3.8 billion in foreign loans maturing this fiscal year, Pakistan’s reliance on short-term commercial loans is critical. The UBL deal reflects a strategic effort to refinance these obligations at lower costs. As the government aims to boost its foreign exchange reserves, its ability to attract affordable loans will be crucial for financial stability. The Pakistan Govt Secures $300 Million Loan, marking a significant step towards economic stability.