IFC and State Bank of Pakistan Join Forces to Strengthen Private Sector Growth

“Promoting private sector growth in Pakistan is paramount to successful, sustainable economic development of the country,” said Jameel Ahmad, Governor of the State Bank of Pakistan.

In a major step toward promoting financial resilience and sustainable private sector growth, the International Finance Corporation (IFC) — a member of the World Bank Group — has announced a strategic partnership with the State Bank of Pakistan (SBP) to expand local currency financing in the country.

The collaboration, formalized through an International Swaps and Derivatives Association (ISDA) agreement, will enable IFC to manage currency risks more efficiently and increase investments in Pakistani rupees, thereby supporting long-term financing for key sectors of the economy.

The initiative aims to bridge Pakistan’s local financing gap, attract private capital, and stimulate job creation, particularly in industries that are vital to national growth, such as infrastructure, manufacturing, agribusiness, and renewable energy.

“Promoting private sector growth in Pakistan is paramount to successful, sustainable economic development of the country,” said Jameel Ahmad, Governor of the State Bank of Pakistan. “This partnership with IFC aims to enhance financing opportunities for the private sector and build a more resilient financial ecosystem.”

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Tackling Exchange Rate Volatility Through Local Currency Financing

Exchange rate fluctuations have long posed challenges for businesses in developing economies like Pakistan, where many companies borrow in foreign currencies such as the U.S. dollar but earn revenue in local currency. This mismatch exposes firms to exchange rate risk, particularly during periods of macroeconomic volatility.

Under the new arrangement, IFC will be able to offer loans and investment products in Pakistani rupees, reducing dependence on foreign-currency borrowing. This will help mitigate exchange rate risk, improve financial stability, and strengthen local capital markets.

“With currency volatility posing significant risks to developing economies, access to local currency financing has never been more important,” said John Gandolfo, IFC’s Vice President and Treasurer, Treasury & Mobilization. “Promoting this type of financing is a strategic priority for the World Bank Group and a catalyst for economic growth in Pakistan.”

By using the ISDA framework, the partnership allows IFC to hedge foreign exchange exposures efficiently, creating a stable environment for long-term investment. It also enhances the SBP’s ability to manage liquidity and foreign exchange stability across Pakistan’s financial system.

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Strengthening Pakistan’s Financial Resilience

Pakistan’s private sector contributes more than 80% of GDP and employs a majority of the country’s workforce, but access to affordable, long-term financing remains limited. The collaboration with IFC is expected to address these financing constraints by facilitating larger and longer-term investments in domestic currency.

The move also aligns with Pakistan’s broader economic reform agenda, which focuses on improving financial inclusion, modernizing payment systems, and fostering sustainable private investment.

“Through this partnership with IFC, we aim to bolster economic resilience, promote private sector development, and improve foreign exchange liquidity in Pakistan,” the SBP said in a statement.

Local currency financing will particularly benefit small and medium-sized enterprises (SMEs), which are often constrained by currency risks and high borrowing costs. By insulating businesses from exchange rate volatility, the initiative can help stimulate entrepreneurship, increase exports, and drive innovation across industries.

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IFC’s Expanding Role in Local Currency Markets

The IFC has a long-standing commitment to developing local capital markets and mobilizing private investment in emerging economies. Across Asia, IFC has successfully launched local currency financing facilities in countries such as Vietnam, India, and Bangladesh, helping strengthen financial systems and support sustainable economic development.

In Pakistan, IFC has been a key partner in several sectors, including renewable energy, financial inclusion, and infrastructure development. Its projects have catalyzed private investment, generated employment, and supported the country’s transition to a more sustainable growth model.

The new agreement builds on IFC’s broader strategy to promote local-currency lending and reduce foreign exchange exposure across its portfolio. It also supports the World Bank Group’s Capital Markets Development Program, which seeks to deepen financial systems in emerging economies and improve access to long-term finance.

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A Step Toward Economic Stability and Investment Growth

The SBP-IFC partnership is expected to enhance market confidence, attract international investors, and foster innovation in financial products, such as currency swaps, green bonds, and Islamic finance instruments. These tools could play a vital role in meeting Pakistan’s infrastructure and climate finance needs.

Moreover, increased local currency lending could help Pakistan’s economy absorb external shocks, reduce reliance on foreign borrowing, and stabilize debt levels—key priorities amid ongoing macroeconomic adjustments.

“This partnership demonstrates our commitment to leveraging innovative financial instruments and strengthening collaborations that support inclusive, sustainable development,” Gandolfo added. “By enabling more rupee-based investments, we’re helping Pakistan build financial resilience and unlock new growth opportunities.”

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Outlook: Building Confidence in Local Markets

The SBP-IFC partnership marks a strategic shift toward de-dollarization of Pakistan’s financial sector, helping create a more balanced and self-reliant economic framework. As local markets mature, such initiatives will be crucial for expanding access to affordable finance, attracting foreign investment, and driving long-term economic recovery.

By integrating global expertise with local priorities, the partnership not only strengthens Pakistan’s financial stability but also supports the country’s path toward inclusive and sustainable development—one where private enterprise plays a central role in powering growth.