Pakistan is weighing multiple financing options — including Eurobonds, loans from friendly countries, and commercial borrowing — to replace a $3.5 billion facility from the United Arab Emirates (UAE) and maintain its foreign exchange reserves, Finance Minister Muhammad Aurangzeb said.
Speaking to Reuters, Aurangzeb also said the economic shock caused by the ongoing conflict in the Middle East has highlighted the need for Pakistan to consider building a strategic petroleum reserve and to accelerate its transition towards renewable energy.
“All options are on the table,” the finance minister said when asked whether the government was in discussions with Saudi Arabia for financial support that could replace the UAE facility.
Pakistan is expected to return the $3.5bn loan to the UAE this month, a move that could place pressure on the country’s foreign reserves and raise concerns about meeting targets under its International Monetary Fund (IMF) programme.
The country has recently drawn international attention due to its role as a mediator between the United States and Iran in efforts to help end the conflict in the Middle East.
Aurangzeb, speaking on the sidelines of the IMF and World Bank spring meetings, said Pakistan remains capable of managing all upcoming debt repayments and that its reserves currently stand at around 2.8 months of import cover.
Maintaining reserves at or above this level, he said, remains critical for ensuring the country’s overall macroeconomic stability going forward.
“We are looking at Eurobond, we are looking at Islamic sukuk, we are looking at dollar-settled rupee-linked bonds,” Aurangzeb said, adding that the government expects to issue Eurobonds later this year while also exploring commercial loans.
He noted that although Pakistan has not yet sought changes or additions to its $7bn IMF lending programme in response to the economic impact of the Middle East conflict, the possibility remains open.
“Depending upon how things pan out over the next few weeks, that’s something which can be discussed,” he said.
According to the finance minister, the IMF’s executive board is expected to approve the latest tranche of lending by the end of this month or early next month, unlocking nearly $1.3bn under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).
Pakistan is also preparing to launch its first-ever Panda bond next month — debt issued in Chinese yuan — with an initial $250 million issuance as part of a broader $1 billion programme.
The bond will be backed by the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).
Aurangzeb said the country’s projected GDP growth of nearly 4 per cent, expected remittances of around $41.5bn, and targeted support for low-income households should help Pakistan absorb the economic shock from the Iran conflict during the current fiscal year ending on June 30.
However, he warned that recent spikes in energy prices underline the need for Pakistan to focus on creating strategic reserves of fuel and LPG, rather than relying solely on commercial stockpiles, while also speeding up investment in renewable energy.
“When you go through a supply shock like this, it sends a very clear message that we need to accelerate these journeys,” he said.