Pakistan's Power Sector Secures $4.5 Billion Islamic Financing

Pakistan has signed agreements with 18 commercial banks for a $4.5 billion Islamic finance facility to address debt in its power sector. The facility aims to ease fiscal pressure and support the country’s IMF program. It will be repaid over six years through concessional lending terms.

Pakistan has reached an agreement with 18 commercial banks to secure a 1.275 trillion Pakistani rupee ($4.50 billion) Islamic finance facility. This initiative aims to tackle the mounting debt crisis in Pakistan's power sector, the country's power minister announced on Friday.

The Pakistani government, which holds significant control over the power infrastructure, struggles with accumulating circular debt, unpaid bills, and subsidies. These financial burdens have stifled the sector, discouraging investment and exacerbating economic challenges. Addressing these issues is crucial for meeting the conditions of Pakistan's $7 billion IMF program.

The Islamic finance facility, agreed upon by the IMF, offers a concessional rate to avoid adding to public debt, with repayments structured over six years. This move is part of Pakistan's broader strategy to shift towards Islamic finance, currently accounting for a quarter of the banking sector.

(With inputs from agencies.)