Pakistan Rejects $490 Million ITFC Loan Over High Interest Rate

Pakistan has rejected a $490 million one-year ITFC loan from the International Islamic Trade Finance Corporation, the trade finance arm of the Islamic Development Bank Group, because of its high interest rate.

ITFC Loan Rejected as Cost Exceeded Bond Yield

The Debt Management Office of the Finance Ministry turned down the offer last week. The Finance Division had hoped for a cost of about 6%, but the ITFC’s all-in cost was about 8%, above the 6.1% yield on the December 2027 bond. The Economic Affairs Division has been asked to find a new facility at competitive rates.

Financing needs remain high. Gross financing needs for FY2026-27 are projected at Rs28.647 trillion, about 20% of GDP, with net external financing estimated at Rs813 billion ($2.8 billion), mostly from multilateral lenders. In August Pakistan took a $300 million loan from United Bank Limited, and in September it raised $3 billion through Eurobonds.

The IMF projects the current account deficit at 1% of GDP, about $4.5 billion, at least $1.5 billion above the $2.5 to $3 billion estimated by Pakistani authorities.

Read More: IMF Sees Pakistan Inflation Rising to 9.9% in 2027