Govt rejects $490m loan over cost

Pakistan has rejected a proposed $490 million, one-year loan from the International Islamic Trade Finance Corporation because officials considered its financing cost too high, The Express Tribune reported. The offer, made through the Islamic Development Bank Group, carried an all-in cost of about 8%, while the government had hoped to borrow at around 6%. Officials said the decision was taken last week, and the Economic Affairs Division has been asked to seek financing at more competitive rates.

The refusal comes as the finance ministry projects gross financing needs of Rs28.647 trillion for fiscal year 2026-27, around 20% of GDP. The ministry’s plan includes a Rs7 trillion federal deficit and more than Rs21 trillion in domestic and external debt maturities; it projects net external financing of Rs813 billion. The IMF separately estimated last fiscal year’s financing needs at around 22% of GDP and put the current account deficit at nearly $4.5 billion, above the Pakistani authorities’ recent estimate.

Pakistan earlier borrowed $300 million through United Bank Limited, with the bank arranging funds from Bahrain and Dubai, and tax relief was granted on profits from the facility. The report also says the government raised $3 billion through Eurobonds in September, including five-year and 10-year issues at face-value rates of 7.5% and 7.9%, respectively.