The Standard Chartered Bank will provide a $200-million commercial loan to Pakistani Government to assist the country finance its liquefied natural gas (LNG) imports.
The total interest cost of SCB loan according to London Interbank Offered Rate(Libor) is 4.2%, its a 12 month floating loan which is quite expensive in nature but the Government has no alternative as Pakistan has missed the concessionary loan from the world bank thanks to previous government’s management crisis.
With the fresh facility, SCB-London’s exposure to Pakistan has increased to over $1.1 billion in the last two years, said officials in the Ministry of Finance and Economic Affairs.
Officials in the ministry said the agreement has a provision of additional financing, but SCB Pakistan declined to comment on the terms of the deal.
Earlier, in financial year 2017-18, SCB-London had provided a $200-million commercial loan in three tranches received between November and January. The last $200 million loan will mature next month.
This new SCB loan will be used to finance LNG imports, which are growing after the fuel-based power plants started commercial operations. In the last fiscal year.
Pakistan imported $2.5 billion worth of LNG to run power plants, which was 87% higher than the preceding year, according to the Pakistan Bureau of Statistics (PBS).
Pakistan is weighing all options to overcome the external financial needs. Last week, China also agreed to extend $2 billion in loans to Pakistan to offset pressure from foreign exchange reserves.
The Islamic Development Bank (IDB) has also activated $4.5 billion worth three-year facility for oil imports. These two facilities have helped take the pressure off the rupee with the currency recovering some of its value against the US dollar in the inter-bank market.
Even after the arrival of Chinese aid and activation of the IDB’s facility, Pakistan’s external financing gap is in the range of $8 billion to $9 billion for this fiscal year, said officials in the finance ministry.
Asad Umar, expected Finance minister, said on Wednesday that the PTI would set up two consultative forums – an Economic Advisory Council and a Business Advisory Council. He said the prime minister will himself chair the EAC meeting and we will try every possible way to recover the country from the financial crisis.