- Pakistan signs term sheets, one bilateral, one for trade: FinMin.
- The first evaluation of the EFF is scheduled for the end of February, says Aurangzeb.
- The minister invites global players to invest in priority sectors.
Pakistan has agreed to terms for a $1 billion loan with two Middle Eastern banks at an interest rate of 6-7 percent, Finance Minister Muhammad Aurangzeb said. Reuters Tuesday, as the country seeks more funding.
“With two institutions, we have now signed the term sheet – one bilateral and one for trade (finance),” Aurangzeb said in an interview on the sidelines of the World Economic Forum’s annual meeting in Davos.
The loans were short term – or up to a year, Aurangzeb added.
The Finance Minister is in Davos to attend the WEF annual meeting between January 20 and 25. World leaders will address key global and regional challenges at the 2025 annual meeting.
The meeting will focus on responding to geopolitical shocks, promoting growth to improve living standards and managing a just and inclusive energy transition.
Pakistan aims to repair its finances after securing a $7 billion bailout from the International Monetary Fund (IMF) in September 2024, with the first review scheduled for the end of February.
“We have the first formal review of the EFF towards the end of February,” Aurangzeb said. “I think we are well positioned for this review.”
The IMF’s Extended Financing Facilities (EFF) provide financial assistance to countries facing serious medium-term balance of payments problems resulting from structural weaknesses that require time to resolve.
Aurangzeb invites global stakeholders
In an exclusive article published as part of the annual meeting of the World Economic Forum (WEF), Finance Minister Aurangzeb called on global stakeholders “to support Pakistan’s journey by investing in priority sectors such as agriculture, information technology (IT), renewable energy and pharmaceutical sectors. “.
The minister highlighted the transformational journey undertaken by Pakistan in recent years towards economic stabilization and growth, APP reported on Tuesday.
“Faced with formidable challenges, we have implemented decisive reforms to build a solid foundation for sustainable and inclusive development. Today, the results of these efforts are becoming evident, with the economy demonstrating resilience and renewed potential,” he says.
Asked about the series of economic reforms, he said: “I took over as finance minister in 2024, Pakistan was facing severe fiscal and monetary pressures and inflation had soared to 38%, putting a strain on strains households and erodes purchasing power.
Aurangzeb said foreign exchange reserves had fallen dangerously low, barely covering two weeks of essential imports like food and fuel, and that industrial production had contracted by 10.3% and GDP growth had dropped to 0.2%.
The combined effects of COVID-19 and devastating floods causing more than $30 billion in damage have further tested our resilience.
Recognizing the seriousness of the situation, “we have implemented a series of necessary reforms, including stabilizing the exchange rate, tightening fiscal policies and controlling inflation through targeted monetary interventions.
“Uraan Pakistan”
With support from the IMF’s $7 billion EFF, the government has launched structural improvements in critical sectors such as energy and taxation. At the heart of this effort was “Uraan Pakistan”, an economic transformation plan launched in 2024,” he said.
He said this initiative aims to achieve sustainable export-led GDP growth of 6% by 2028 through public-private partnerships, increased export competitiveness and optimized public finances. Priority sectors include agriculture, energy, textiles, pharmaceuticals and IT.
The Finance Minister said a critical element of ‘Uraan Pakistan’ is our collaboration with the World Bank on a $20 billion initiative targeting health, education, poverty reduction, investment and climate resilience.
He said this transformative partnership addresses critical challenges such as child malnutrition, educational outcomes and clean energy adoption.
By integrating sustainability into our development framework, “we are contributing to global efforts to achieve the United Nations Sustainable Development Goals (SDGs), ” he said.
The minister said that in July 2024, we presented a reform-oriented budget with an ambitious target of increasing revenue by Rs 13 trillion, an increase of 40% from the previous year.
He said these reforms aimed to broaden the tax base by targeting undertaxed sectors like agriculture, real estate and commerce, while leveraging technology to improve compliance and transparency.
The modernization of the Federal Board of Revenue (FBR) has been instrumental in streamlining tax administration.
Speaking about the current economic challenges, he said that despite significant achievements, challenges remain and to break free from external aid cycles, Pakistan is tackling structural inefficiencies in revenue collection, energy, business public and privatization.
He said fixing the federal government, reforming state-owned enterprises and fostering export-led growth would strengthen internal revenue flows and reduce reliance on international financing programs.
The minister said that global stakeholders are invited to support Pakistan’s journey by investing in priority sectors such as agriculture, IT, renewable energy, mining and minerals, textiles and clothing, pharmaceuticals , while capitalizing on special economic zones (SEZs).
He said Pakistan’s innovative approaches to taxation and economic stabilization offer valuable lessons for other developing economies and furthermore, partnerships on climate resilience and sustainable development are crucial to advancing common global goals.