Islamabad:
The Ministry of Finance signed a five-year long-term financing facility for $ 1 billion, the government said in a statement on Wednesday.
The funding is led by Dubai Islamic Bank and Standard Chartered, and the Islamic Tranche forms 89% of the loan facility, according to the statement.
“The Ministry of Finance has signed a syndicated thermal financing facility of $ 1,000 million partially guaranteed by a policy-based guarantee of the ADB program ‘Improved Resource Mobilization & Utilization Reform’,” according to a press release.
“The facility is a milestone transaction for Pakistan’s government that demonstrates strong support from leading financiers in the region. This is a five-year multi-tranch facility, including both Islamic and conventional Trans,” it said.
The Ministry of Finance said the Islamic facility was structured to be fully in line with AAOIFI standards and accounts for 89 percent of the total financing amount and the remaining 11 PC was from conventional financing.
It added, “The transaction was also the first facility supported by ADB’s policy-based guarantee linked to political reform measures made by an ADB Member State, ie Pakistan.”
“The ADB program is designed to support Pakistan to build long-term fiscal resilience and stability and has supported Pakistan’s re-journey to international commercial markets with considerable interest from banks in the Middle East,” the press release reads.
Meanwhile, the ministry announced that it was successfully over RS1.2 trillion through a larger auction of government bonds held on Wednesday.
This includes the launch of a new 15-year-old zero coupon bond, the first of its kind in Pakistan to receive a strong demand from investors and traveled over the RS47 billion.
This new bond does not pay interest every year. Instead, investors receive a lump sum at the end of 15 years. This helps the government reduce short -term repayments and plan the economy better. The strong reaction shows that investors are sure of Pakistan’s economy and reforms.
This step is part of the government’s wider strategy to reduce borrowing risks, extend the repayment period of debt and promote Islamic and long -term financial products. Dividends on other government bonds also fell, indicating optimism in the financial markets of falling inflation and lower interest rates in the future.
Pakistan’s debt is now becoming more stable. The average repayment period for domestic debt has risen from 2.7 years last year to 3.75 years now, reducing the pressure to repay loans quickly. In addition, several pension funds and insurance companies – rather than just banks – are investing now in government bonds. This helps to spread financial risk and elaborate on the local investor base.
Finance Minister Senator Muhammad Aurangzeb said: “This is a big step forward to make Pakistan’s financial system stronger and more resilient. We introduce new, smart ways of borrowing that reduce the risk and give investors more opportunities. Our goal is to control the public in responsible, promote Islamic funding and attract more long -term investments to support the country’s financial growth.”
The Ministry of Finance is also working on several products to allow ordinary citizens to invest in government bonds, especially Islamic, to encourage savings and financial inclusion.
Despite global uncertainties, today’s auction shows that Pakistan’s economy wins the investor confidence and moves in the right direction.
With additional input from Irshad Ansari
