Pakistan to pay up to 8.5% interest rate on foreign debt, including IMF loans

The government will pay up to 8.5% of the interest rate on foreign debt, including the International Monetary Fund’s (IMF) loan, over a 10-year period. 

In a briefing of the Senate Standing Committee on Finance, the secretary of finance informed the memebers that Pakistan has taken its latest debt from the IMF at nearly 5% of the interest rate, which means that the country will return approximately $7.35 billion over the bailout programme of $7 billion within the 10 years. 

Similarly, Finance Minister Muhammad Aurangzeb said the country has taken $7.4 billion in foreign commercial loans, with interest ranging from 7% to 8%. 

Moreover, the Pakistan Muslim League Nawaz (PML-N) led coalition government took a $200 million commercial loan from the Bank of China in September, with an 8.5% interest rate, according to the statistics shared by the Ministry of Finance. 

Despite billions of dollars in loans Pakistan has to take $2.5 billion from foreign countries to fill the external gap that has been identified by the IMF. 

Nevertheless, the Finance Minister stated that “the external gap will be covered soon," and they will borrow the money on their own terms and at competitive rates.”

Moreover, he said that if any loan is signed in future, his team will share the details with the standing committee. 

Mr Aurangzeb also apprised the committee about efforts to upgrade the rating from CCC plus, to enter the international capital market to float sovereign and Panda bonds of China. 

"If we get a rating enhancement, the government will try to tap the Chinese capital markets and float the Panda bonds", said Aurangzeb.

Pakistan has asked the International Monetary Fund (IMF) to consider providing an additional $1 billion to $1.5 billion to help the country tackle climate change, he added.