Pakistan loans, grants, aid and other facilities Updates.

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Pakistan gets $4.5 Billion facility for oil LNG imports

Pakistan has secured a $4.5 billion worth of three-year trade financing facility from Jeddah-based Islamic Trade Corporation (ITFC) to cover import cost of crude, petroleum products and liquefied natural gas (LNG).
A formal financing framework agreement on the arrangement would be signed early next week here. The funds would be utilised under Annual Financing Plan of roughly $1.5bn each.

This trade financing arrangement is in addition to about $531 million already signed by Ministry of Economic Affairs with Saudi Fund for Development (SFD) for project financing of Mohmand dam, a couple of coal based projects besides a few hydropower projects including two in Azad Kashmir.

The ITFC’s financing would be utilised over three years (2021-23) by Pak-Arab Refinery Ltd (Parco), Pakistan State Oil (PSO) and Pakistan LNG Ltd (PLL) for import of crude oil, refined petroleum products and LNG and help augment the country’s foreign currency reserves and provide resources to meet the oil import bill.

 

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Pakistan receives $13.12bn loans in 2020-21: EAD

The Frontier Post

ISLAMABAD, (TLTP): The Economic Affairs Division on Saturday shared that Pakistan has received a foreign loan of $12.13 billion in the outgoing fiscal year 2020-21.

The monthly report of Foreign Economic Assistance released by the Economic Affairs Division (EAD) shared that the country received over US$3 billion under multilateral and bilateral loans.

The report highlighted that Asian Development Bank (ADB) provided the country with most of the financial assistance that amounted to US$1.28 billion.

An amount of Rs417 million was received under the bilateral agreements, the EAD report said, adding that $3.6 billion loans were also given to the government by commercial banks.

During the last month, the EAD in its report said that Pakistan received foreign loans amounting to $10.19 billion during the first ten months of the outgoing fiscal year 2020-21. During the July-April period, Pakistan received US$3.1 billion under mutual agreements, it said in its monthly disbursement report adding that most of the loans have come from the Asian Development Bank (ADB) that stands at US$1.26 billion.

The Economic Affairs Division further said that mutual agreements with various countries also helped in receiving foreign loans of $376 million.

“The country also sold out its bonds worth US$2.5 billion during the period of July and April 2020,” shared the division as the country is bound to share the loan figures publically under an agreement with the International Monetary Fund (IMF). It said that a foreign loan of US$3.25 billion was also received from the commercial banks.

 

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During July-May FY21, the government borrowed $12.13bn compared to $7.44bn in the same period in previous fiscal year.

KARACHI: Pakistan borrowed over $12 billion during the 11 months of the current fiscal year (11MFY21) – an increase of about 63 per cent compared to the same period in FY20 – reflecting the growing need for foreign exchange despite record remittances and higher exports.

During July-May FY21, the government borrowed $12.13bn compared to $7.44bn in the same period in previous fiscal year, recording an increase of $4.68bn or 62.8pc. According to the monthly data for May issued by the Ministry of Economic Affairs, unlike previous year, the government borrowed heavily during FY21 to maintain its improved foreign exchange reserves.

However, about half of the loans were borrowed as commercial loans which mean the interest would be much higher than the loans received from the Asian Development Bank (ADB), World Bank and Islamic Development Bank (IDB).

About half of the loans were commercial with higher interest rate

This higher borrowing was made despite current account surplus which was not expected before the beginning of the new fiscal FY21. During the 11MFY21, current account is still surplus with $153 million which has been a great support to the external account of the economy particularly in the presence of 29pc growth in remittances.

The borrowings from multilateral sources were $3.37bn while the commercial banks total was $3.61bn. The commercial borrowings cost heavily and debt servicing would further increase in the coming years. During the first three quarters of the FY21, the government paid $10.63bn as debt servicing while the expected total at the end of the fiscal year could be around$14bn.

Among the multilateral sources, ADB provided $1.28bn, International Development Association (IDA) $850m and IDB provided $508m as short-term finance.

Pakistan received $417m from bilateral sources. The total of multilateral and bilateral loans reached at $3.79bn during 11MFY21.

With the inclusion of $3.61bn commercial banks loans and $2.5bn euro bonds, the total public grants and loans reached at $10.89bn. The addition of publically guaranteed debt of $1.24bn made the total borrowing as $12.13bn. The grants in the total were of $231m.

The data shows that inflow of loans during the month May was around $699.7m. However, the government remained close to its target set in the budget for grants and loans.

The budget shows the inflow of grants for FY21 as $275.8m while the 11MFY21 inflow reached at $231.6m. Similarly, the loans estimate in budget was $11.96bn while it reached at $11.90bn during this period.

The government has been facing a difficult situation despite current account surplus of $153m in 11MFY21. The current account has been facing deficits for the last six months. The deficit in May was $632m indicating that June, the last month of this fiscal could see even higher deficit.

Most of the payments are concluded at the end of the fiscal year that may cause bigger outflows from the country.


Published in Dawn, June 27th, 2021

 

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Punjab water, sanitation project: $442.4m financing pact inked with World Bank

Tahir Amin
27 Jun 2021

ISLAMABAD: The government of Pakistan and the World Bank have signed the financing agreement of Punjab Rural Sustainable Water Supply and Sanitation Project worth $442.4 million.

Noor Ahmed, secretary, Ministry of Economic Affairs signed the financing agreement on behalf of the government of Pakistan, while NajyBenhassine, Country Director, World Bank signed the agreement on behalf of the World Bank.

According to official sources, total cost of the project is $553 million, where the International Bank for Reconstruction and Development (IBRD) commitment is $200 million and International Development Association (IDA) commitment is $242.4 million.

The loan will be provided by the IDA @ two percent and IBRD @ LIBOR + 0.5 percent, the official added.

This project aims to provide equitable and sustainable access to clean drinking water; improve sanitation; and reduce child stunting in Punjab.

The project interventions will cover 2,000 villages including 2,000 main settlements and 8,000 small settlements in 16 districts of Punjab that are the poorest and have the worst social infrastructure and stunting issue.

In line with the vision of Prime Minister Imran Khan to ensure equitable and inclusive socioeconomic opportunities, eight districts from South Punjab, ie, Bahawalnagar, Bahawalpur, DG Khan, Lodhran, Multan, Muzaffargarh, Rahim Yar Khan and Rajanpur are included in the project.

Furthermore, eight other districts from Central and North Punjab i.e. Bhakkar, Chakwal, Chiniot, Jhang, Khushab, Mianwali, Pakpattan and Sargodha are also included after due diligence.

The project will directly impact the life of common man and create employment opportunities in the rural areas.

The government will invest in social infrastructure and improve service delivery to, (i) provide potable water through cost-effective and sustainable investments; (ii) provide safely managed sanitation facilities to reduce the total fecal burden in the village environment; and (iii) raise awareness and promote behaviour change for better hygiene practices at the household and community level to promote health and ensure the sustainability and quality of the water source.

The project interventions will directly benefit to six million rural people of Punjab and will support in reducing the incidence of stunting among children aged 0-3 (40 percent) in Punjab.

Minister for Economic Affairs Omar Ayub Khan appreciated the World Bank’s efforts by highlighting that this is a signature project, which reflects the vision of the Prime Minister of Pakistan to invest in human capital and to improve the living standard of the people.

The minister further stated that today’s event was a reflection of continued confidence by the IFIs on the government’s policies, economic reforms and people-centered programs.

He reiterated the commitment of Federal Government to extend all possible support to the provincial governments in their efforts to invest in human capital by addressing challenges to health and education; building resilience, improving service delivery and promoting economic opportunities to ensure inclusive and sustainable economic growth in the country.

The secretary EAD thanked the World Bank Country Team for extending their continuous support to the Government of Pakistan to help achieving sustainable economic development in Pakistan. Country Director World Bank NajyBenhassine ensured the World Bank’s continued financial and technical support to Government of Pakistan in achieving the priority development objectives and to promote inclusive and sustainable economic growth in the country.

“PRSWSSP will help more than six million rural residents in the poorest districts of Punjab to reduce child stunting and address areas at high risk to droughts and water scarcity,” said Benhassine, adding that the World Bank is committed to the government in improving sustainable water resource management.

This project will support investments that increase climate resilience, including flood protection, rainwater harvesting and water conservation in these districts.

Copyright Business Recorder, 2021

 

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World Bank approves $800m loan for power sector, human development programs

• Funds will be used to finance the Pakistan Program for Affordable and Clean Energy (PACE) and the Second Securing Human Investments to Foster Transformation

Ali Ahmed
29 Jun 2021

The World Bank’s Board of Executive Directors approved on Tuesday $800 million in lending for two programs in Pakistan.

The funds will be used to finance the Pakistan Program for Affordable and Clean Energy (PACE) and the Second Securing Human Investments to Foster Transformation, read a statement.

The $400 million for PACE focuses on measures to improve financial viability of the power sector and support the country’s transition to low-carbon energy. The goal of the program is to reduce circular debt over the long-term.

“Power sector reforms are critical to resolving Pakistan’s fiscal challenges,” said Rikard Liden, World Bank Task Team Leader for the PACE program. “Decarbonizing the energy mix will reduce the dependence on fossil fuel imports and vulnerability to price fluctuations because of movement in exchange rates. PACE prioritizes action on such reforms, which must be sustained to address circular debt and set the power sector on a sustainable path.”

On the other hand, $400 million will be utilized for the Second Securing Human Investments to Foster Transformation program (SHIFT II), which focuses on improving health and education services, increase income-generation opportunities for the poor, and promote inclusive economic growth.

“Strengthening services that build human capital in a coordinated manner between provincial and federal authorities, along with improved targeting of social safety nets, will better support families to recover from the Covid-19 crisis, and pave way for more robust crisis preparedness in the future,” said Tazeen Fasih, World Bank Task Team Leader for the SHIFT II program.

WB said that SHIFT II reforms increase budget reliability for sustainable financing of child immunization and quality primary healthcare programs, promote student attendance — especially for children who are out of school due to COVID-related closures — and support data-driven decision-making.

“The reforms underpinning PACE and SHIFT can contribute to facilitating sustainable investments and generate welfare gains for those most in need,” said Najy Benhassine, World Bank Country Director for Pakistan.

 

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Three-year framework: Pakistan, IITFC sign $4.5bn agreement

29 Jun 2021

ISLAMABAD: The International Islamic Trade Finance Corporation (IITFC) signed a 3-Year Framework Agreement for a cumulative amount of $4.5 billion with the Government of Pakistan in order to provide financing for the import of essential commodities such as crude oil, refined petroleum products, LNG, and urea, said a press release.

Within the context of its trade integrated solutions approach, the Framework Agreement also covers IITFC's support for trade-related technical assistance projects in the Islamic Republic of Pakistan, which will be selected jointly by both parties according to the national economic priorities and development plan of Pakistan.

The agreement will facilitate identification of other areas of cooperation at country and regional levels and to enhance and promote trade, trade capacities of relevant state authorities and financial institutions and trade cooperation in Pakistan.

The signing took place virtually, where Omar Ayub Khan, Minister of Economic Affairs witnessed the signing ceremony between Eng Hani Salem Sonbol, CEO, ITFC and Noor Ahmed, Secretary, Ministry of Economic Affairs, Pakistan.

The financing available through this facility will be utilized by Pakistan State Oil (PSO), Pak-Arab Refinery Ltd (PARCO), and Pakistan LNG Ltd (PLL) for import of crude oil, refined petroleum products and LNG during the years 2021-2023.

Referring to the agreement, Eng Hani Salem Sonbol, CEO, IITFC stated that this framework agreement reflects the importance of the longstanding cooperation between the ITFC and the Government of Pakistan.

"ITFC is continuously working closely with its member countries to meet their requirements by providing integrated solutions that include financing and capacity building tools that allows for maximising the development impact of ITFC interventions. We are delighted and we will continue to mobilise financial resources to support Pakistan in its endeavours to achieve its economic targets through the new Framework Agreement."

Omar Ayub thanked the IITFC for arranging this financing, which will help Pakistan in meeting its import requirements of oil and LNG and ease pressure on cash reserves of the country. The minister deeply commended the role and endeavours of Engr Hani Salem Sonbol, CEO, IITFC and his team for arranging this financing at a very challenging time. This agreement will further strengthen partnership between Pakistan and the ITFC.-PR


Copyright Business Recorder, 2021

 

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Pakistan, IDB sign $4.5b oil deal

Three-year facility will provide financing for oil and gas imports

Shahbaz Rana
June 29, 2021

Brent crude futures were $0.26, or 0.4%, higher at $74.94 a barrel by 1220 GMT. PHOTO: FILE


ISLAMABAD: Pakistan and the Islamic Development Bank (IDB) on Monday signed a $4.5 billion framework agreement for a commercial loan to finance oil and gas imports amid only 55% utilisation of a similar three-year facility.

The International Islamic Trade Finance Corporation (ITFC) signed the three-year framework agreement for a cumulative amount of $4.5 billion with Pakistan in order to provide financing for the import of essential commodities such as crude oil, refined petroleum products, LNG and urea, the Ministry of Economic Affairs announced.

Jeddah-based ITFC is the financing arm of the IDB for trade activities. The financing will help Pakistan meet energy requirements for the period 2021 to 2023. It will allow the country to finance vital imports of crude oil and refined petroleum products. The fresh facility has been obtained at an average rate of London Interbank Offered Rate plus 2.5%, said the sources. The previous three-year facility had been drawn at Libor plus 2.5% to 2.75%.

Under the umbrella framework agreement, separate commercial agreements will also be signed that will determine the exact interest rate.

Read more: Oil declines but on track for weekly gain on strong demand
However, the government could not take full advantage of the 2018-2020 similar facility. Only $2.5 billion or 55% could be utilised against the $4.5 billion facility, said an official of the Ministry of Economic Affairs. The government could utilise on an average $833 million as against the annual financing envelope of $1.5 billion.
The ministry blames the Covid-19 outbreak and low oil prices for the lack of utilisation of the facility. The country imported $8.5 billion worth of petroleum products including gas during the 11-month period (July-May) of current fiscal year, according to the State Bank of Pakistan (SBP).

Last week, the government also announced a Saudi oil facility of $1.5 billion per annum on deferred payments, which was half the amount that Saudi Arabia had given in November 2018 under a three-year agreement. But the three-year facility was prematurely terminated within the first year.

Payments against oil imports are settled overseas, which takes off the pressure from the rupee in the inter-bank market. The rupee has also come under pressure in recent days and is being traded around Rs158 to a dollar.

Within the context of its trade-integrated solutions approach, the framework agreement also covers ITFC’s support for trade-related technical assistance projects in Pakistan, which will be selected jointly by both the parties according to the national economic priorities and development plan of Pakistan, said the ministry.

It added that the agreement would facilitate identification of other areas of cooperation at country and regional levels and enhance and promote trade, trade capacities of relevant state authorities and financial institutions and trade cooperation in Pakistan.

The signing took place virtually where Minister of Economic Affairs Omar Ayub Khan witnessed the signing between ITFC CEO Hani Salem Sonbol and Ministry of Economic Affairs outgoing Secretary Noor Ahmed. The financing available through this facility will be utilised by Pakistan State Oil (PSO), Pak-Arab Refinery Ltd (Parco) and Pakistan LNG Ltd (PLL) for import of crude oil, refined petroleum products and LNG during the years 2021-2023.

Referring to the agreement, Sonbol stated that the framework agreement reflected the importance of longstanding cooperation between the ITFC and the government of Pakistan.

“ITFC is continuously working closely with its member countries to meet their requirements by providing integrated solutions that include financing and capacity building tools that allow for maximising the development impact of ITFC interventions.”

Published in The Express Tribune, June 29th, 2021.