DUBAI: The Government of Pakistan is raising a $200 million syndicated loan with three United Arab Emirates (UAE) banks, banking sources familiar with the matter said, as Islamabad clings to external funding to stave off the pressure on balance of payments.

The loan, with a one-year maturity, is being arranged by Commercial Bank of Dubai, Emirates NBD, and Noor Bank, said the sources.

Pakistan needs to raise funds to offset a drop in international reserves and to fill a fiscal deficit which the International Monetary Fund estimates at 5.5 per cent of gross domestic product this year.

Pakistan’s Finance Minister Miftah Ismail confirmed Pakistan was borrowing $200 million and said it would help the country’s debt repayments.

“We are raising this money to boost our reserves,” he told Reuters. “As we pay out money to different institutions, we need to rebuild our reserves.”

Ismail added that the loan may rise to $350m in coming weeks, and that Pakistan would retire an equivalent amount in local-currency borrowing.

“This will change our debt profile but it will not increase our overall debt,” he added.

The three UAE banks are now syndicating the debt facility to other lenders, said the sources.

Pakistan’s economic growth has surged to above 5pc, but many analysts expect the country to seek a new IMF bailout this year because of a ballooning current account deficit and a significant decline in foreign currency reserves.

Pakistan raised a $2.5bn bond late last year through a $1bn sukuk and a $1.5bn conventional bond.

The country has been very active in the loan market recently, as balance of payments pressure mount. It raised a $700m 10-year loan late last year with a partial guarantee from the International Bank for Reconstruction and Development, a unit of the World Bank.

It was once again in the market earlier this year for a $450m one-year loan led by Credit Suisse and Industrial and Commercial Bank of China.

Published in Dawn, May 24th, 2018