Kamal Ghorui
With its finances severely strained, Pakistan is scrambling for options to replace the $3.5 billion facility from the United Arab Emirates and stabilise its foreign exchange reserves. The country is weighing a range of financing options, including issuing Eurobonds, securing bilateral loans, and raising commercial debt, Pakistan Finance Minister Muhammad Aurangzeb has said.Pakistan is holding talks with Saudi Arabia and China to secure financial assistance as it prepares to repay a loan of roughly $3 billion to the United Arab Emirates, sources told Bloomberg.The negotiations are said to cover both borrowing and potential investments.For the first time in seven years, Pakistan was unable to reach an understanding with the UAE to roll over the debt. As a result, Islamabad is set to clear the dues by the end of this month, a move that is expected to place considerable pressure on its foreign exchange reserves, currently estimated at around $16 billion, sufficient for about three months of imports.Speaking to Reuters, Aurangzeb noted that the ongoing conflict in the Middle East has underscored the need for Pakistan to build strategic petroleum reserves and accelerate its transition toward renewable energy.When asked whether discussions were underway with Saudi Arabia for a loan to substitute the UAE support, he said that every option remains under consideration.Speaking on the sidelines of the IMF and World Bank spring meetings, Finance Minister Muhammad Aurangzeb said Pakistan remains capable of meeting its debt obligations, with foreign exchange reserves currently covering about 2.8 months of imports. Preserving this level, he noted, is crucial for maintaining overall macroeconomic stability in the period ahead.He said the government is evaluating multiple financing avenues, including Eurobonds, Islamic sukuk, and dollar-settled, rupee-linked bonds. Plans are in place to issue Eurobonds within the year, while options for raising funds through commercial borrowing are also being explored.Aurangzeb added that although Islamabad has not yet sought any revisions or additional support under its $7 billion IMF programme in response to the economic impact of the Middle East conflict, such a move remains under consideration. “Depending on how the situation evolves over the coming weeks, it is something that could be taken up,” he said.He indicated that the IMF board is expected to approve the next tranche of funding by the end of this month or early next month. This would release just under $1.3 billion through the Extended Fund Facility and the Resilience and Sustainability Facility.Pakistan is also preparing to introduce its first Panda bond next month, a yuan-denominated debt instrument. The initial issuance of $250 million is part of a broader $1 billion plan and will be supported by the Asian Development Bank and the Asian Infrastructure Investment Bank.Aurangzeb said projected GDP growth of around 4%, remittance inflows of roughly $41.5 billion, and targeted support for the most vulnerable sections of society should help the country absorb the economic impact of the Iran conflict during the current fiscal year ending June 30.However, he stressed that rising prices highlight the need to build strategic reserves of fuel and LPG rather than relying solely on commercial stockpiles, alongside accelerating the transition to renewable energy.“When a supply shock of this nature occurs, it clearly signals the urgency of moving faster on these fronts,” he said.
