Pakistan turns down $490 million ITFC loan at about 8%, wants money nearer 6%

Pakistan has turned down a $490 million (about Rs 136 billion) one-year commercial loan from the International Islamic Trade Finance Corporation (ITFC), the trade-finance arm of the Islamic Development Bank Group, because the price was too high, ProPakistani reported on Sunday 25 October. The Debt Management Office of the Finance Ministry rejected the offer last week.

The ITFC's all-in cost came to about 8%. The Finance Division wanted around 6%, and Pakistan's own dollar bond maturing in December 2027 is trading at a yield of 6.1%. Borrowing from the ITFC would have meant paying roughly two percentage points more than the market charges Pakistan for similar money.

What happens now

The government has asked the Economic Affairs Division to find a replacement facility at a competitive rate, either from the ITFC on better terms or from another lender. No new deal has been announced.

Why the price matters

Two percentage points on $490 million is close to $10 million (about Rs 2.7 billion) in extra interest over a year, money that comes out of the federal budget. The decision also tells lenders that Pakistan now thinks it can borrow more cheaply than it could a year ago.

The context, from the same report:

• Gross financing need for 2026-27: Rs 28.647 trillion, about 20% of GDP.
• Net external financing: Rs 813 billion ($2.8 billion), mostly from multilateral lenders.
• Recent borrowing: $3 billion of Eurobonds in September, including a 5.5-year bond at 7.5% and a 10-year bond at 7.9%; a $300 million loan from United Bank Limited in August; and three IsDB loan agreements worth $603 million earlier in the year.
• Current account: the IMF projects a deficit of about 1% of GDP, nearly $4.5 billion, against the $2.5 billion to $3 billion Pakistani authorities expect.

What it means for you

Cheaper government borrowing leaves more room in the budget and less pressure on the rupee. The rupee's daily rate is on our dollar to rupee page, and the policy rate and KIBOR pages show what local borrowing costs. If you are comparing savings options while rates move, the National Savings calculator shows current profit on each scheme.