The Ministry of Finance has successfully signed a $1 billion syndicated term finance facility. This significant agreement is partially backed by a policy-based guarantee from the Asian Development Bank (ADB), under its “Improved Resource Mobilisation & Utilisation Reform” program.
According to a press release from the ministry, Dubai Islamic Bank served as the Sole Islamic Global Coordinator, while Standard Chartered Bank acted as the Mandated Lead Arranger and Bookrunner. Additional financiers include Abu Dhabi Islamic Bank as a Mandated Lead Arranger, and Sharjah Islamic Bank, Ajman Bank, and HBL as Arrangers.
This five-year, multi-tranche facility, which incorporates both Islamic and conventional tranches, is a landmark transaction for Pakistan. It demonstrates strong support from leading financiers in the region. The Islamic component of the facility was structured to be fully compliant with AAOIFI standards and accounts for 89% of the total financing amount, with the remaining 11% sourced from conventional financing.
Notably, this transaction marks the first facility supported by an ADB Policy-Based Guarantee directly linked to policy reform measures undertaken by an ADB member country, specifically Pakistan. The ADB program is designed to bolster Pakistan’s long-term fiscal resilience and stability, and it has facilitated Pakistan’s re-entry into international commercial markets, attracting significant interest from Middle Eastern banks.
This achievement signifies that the Government of Pakistan has re-entered the Middle Eastern financial market after an almost two-and-a-half-year hiatus. This success indicates renewed market trust in Pakistan’s fiscal stability and an overall improvement in its macroeconomic indicators. Furthermore, this transaction inaugurates a new partnership between the Government of Pakistan and Middle Eastern banks.
Earlier this month, the ADB approved an $800 million financing package to support Pakistan’s initiatives for fiscal sustainability and stronger public financial management, amidst ongoing debt and reform pressures. The aforementioned package, as stated by the Philippines-based lender on June 3, includes a $300 million policy-based loan and the ADB’s first-ever policy-based guarantee of up to $500 million, aiming to mobilize as much as $1 billion from commercial lenders.
This funding is part of the “Improved Resource Mobilisation and Utilisation Reform Program, Subprogram 2,” which supports extensive fiscal and governance reforms. These reforms encompass overhauls in tax policy and administration, public expenditure management, and digital governance – all crucial components of Islamabad’s efforts to contain the fiscal deficit and reduce public debt.
ADB Country Director Emma Fan commented, “Pakistan has made significant progress in improving macroeconomic conditions. This programme backs the government’s commitment to further policy and institutional reforms that will strengthen public finances and promote sustainable growth.”
