Islamabad, Nov 21: The International Monetary Fund (IMF) will provide $1 billion in climate financing to Pakistan after the first economic review of the Extended Fund Facility (EFF) loan program in March 2025, subject to meeting key targets.
If approved, this financing will make the current loan program the largest in Pakistan’s history. However, recent discussions with the IMF mission showed limited progress on climate-related funding, according to sources.
The IMF has agreed to Pakistan’s proposal to allocate 1% of GDP annually to climate change initiatives, including disaster management and early warning systems under the National Adaptation Plan.
The release of climate financing will depend on achieving specific conditions tied to these targets, Finance Ministry sources confirmed.
Floods in 2022, which scientists said were aggravated by global warming, affected at least 33 million people and killed more than 1,700. The country’s economic struggles and high debt burden impinged its ability to respond to the disaster.
Pakistan is also in talks with the Asian Infrastructure Investment Bank for a credit enhancement for a planned Panda bond, Aurangzeb said. It is targeting an initial issuance of $200-250 million by the end of June.
A Panda bond would be Pakistan’s first foray into China’s capital markets. Aurangzeb said they were talking to “a few other institutions” in addition to the AIIB for a credit enhancement.
Credit enhancements provide some level of guarantee for bonds, which can boost their rating, attract more investors and thus cut the government’s borrowing costs.
Issuing in the world’s “second largest and the second deepest” capital market was, Aurangzeb said, the key aim, rather than a particular issuance size.
