[Pakistan Pursues $1.5B World Bank‑Guaranteed Financing to Strengthen Debt Management]
ISLAMABAD: Pakistan is exploring a proposal to raise approximately $1.5 billion in financing backed by World Bank Group guarantees, the finance ministry said on Friday. As Islamabad seeks cheaper, longer‑term borrowing to manage its external debt, the move aligns with the nation’s effort to diversify its funding sources and reduce reliance on expensive, short‑term loans.
The proposal emerges as the South Asian country works to expand its debt profile beyond international rescue programs toward more resilient, cost‑effective solutions after successive balance‑of‑payments crises forced it to courier the International Monetary Fund.
Current efforts include returning to international debt markets through private placements, Panda bonds and Eurobonds. The government aims to leverage these avenues to refinance costly debt and extend repayment horizons without inflating its total external debt burden.
“Finance Minister Muhammad Aurangzeb welcomed the idea of pairing a World Bank policy‑based guarantee with Multilateral Investment Guarantee Agency (MIGA) protection to attract competitive financing,” the ministry stated following his meeting with Alvarez & Marsal consultants on the sidelines of the IMF and World Bank Annual Meetings in Bangkok. “The combination could enable lower‑cost or longer‑maturity funding than available in standard markets.”
World Bank guarantees reduce risk perceptions for lenders, allowing borrowers to tap commercial financing on more favourable terms, while MIGA—also part of the Group—backs specific investment and financing risks, promoting private capital in emerging economies.
When merged, these tools may let Pakistan secure capital at reduced spreads or with extended tenors compared with what private markets now offer.
In discussing the deal, officials highlighted planned use of existing World Bank Development Policy Operations instead of crafting a new framework, to avoid procedural delays. Further analysis of the concept was scheduled for the Finance Division, Economic Affairs Division and World Bank Group.
The ministry refrained from naming prospective lenders, specifying exact loan terms or setting a calendar for the transaction. It also did not clarify how much of the $1.5 billion would be covered by World Bank guarantees.
Earlier, the nation relied on World Bank guarantees to boost commercial deals—such as a 2017 arrangement that paired a $700 million loan with a $420 million policy‑based guarantee. The new proposal builds on that precedent.
This financing push coincides with Islamabad’s drive to sustain economic growth despite higher global energy costs and disruptions tied to ongoing regional conflicts, both of which increase pressure on an import‑dependent economy.
PRIVATIZATION PUSH
Separately, during a Bangkok meeting, the Finance Ministry engaged Deutsche Bank, which expressed interest in providing strategic advisory support for Pakistan’s privatisation programme, targeting electricity distributors and major airports.
The government intends to accelerate divestment of loss‑making state enterprises under its IMF‑backed reform agenda, building on the successful sale of Pakistan International Airlines last year. “The Finance Minister welcomed Deutsche Bank’s interest” the ministry later confirmed.
The Finance Ministry clarified that the agency has yet to confirm whether a full proposal was filed nor to detail specific transaction lines. The Privatization Commission identified nine entities pre‑qualified for the sale of Gujranwala Electric Power Company, including three Turkish firms, while preparations continue for Islamabad Electric Supply Company and Faisalabad Electric Supply Company.
The airport initiative adopts a public‑private partnership model rather than outright asset sales, aiming to bring commercial operators into key international hubs.