ISLAMABAD: The Standard Chartered Bank will give a $200-million commercial loan to Pakistan to help the country finance its liquefied natural gas (LNG) imports, as Islamabad continues to weigh options to meet gross external financing needs.

With the fresh facility, SCB-London’s exposure to Pakistan has increased to over $1.1 billion in the last two years, said officials in the Ministry of Finance and Economic Affairs. They said the new loan has been secured at a 12-month floating London Interbank Offered Rate (Libor) plus 1.4%. This brings the total cost at the current Libor rate to over 4.2%.

SCB Pakistan declined to comment on the terms of the deal.

Officials in the ministry said the agreement has a provision of additional financing.

Earlier, in fiscal year 2017-18, SCB-London had provided a $200-million commercial loan in three tranches received between November and January. The last $200 million loan will mature next month.

The fresh facility will be used to finance LNG imports, which are growing after the fuel-based power plants started commercial operations. In the last fiscal year, Pakistan imported $2.5 billion worth of LNG to run power plants, which was 87% higher than the preceding year, according to the Pakistan Bureau of Statistics (PBS).

Last week, China also agreed to extend $2 billion in loans to Pakistan to offset pressure from foreign exchange reserves. The Islamic Development Bank (IDB) has also activated $4.5 billion worth three-year facility for oil imports. These two facilities have helped take the pressure off the rupee with the currency recovering some of its value against the US dollar in the inter-bank market.

During the week ending 27 July, SBP’s gross official reserves increased by $1.339 billion to $10.35 billion due to official inflows, the central bank reported on Thursday.

However, these measures provide short-term relief, and are not sufficient to address overall financing needs of the country, estimated in the range of $25 billion to $28 billion.

In an interview with Bloomberg, Pakistan Tehreek-e-Insaf (PTI) leader Asad Umar, the man tipped to be finance minister, said the decision to overcome external financing challenges needs to be taken in the next six weeks. He listed the International Monetary Fund (IMF), friendly countries and issuance of diaspora bonds among options to bolster depleting reserves.

Even after the arrival of Chinese aid and activation of the IDB’s facility, Pakistan’s external financing gap is in the range of $8 billion to $9 billion for this fiscal year, said officials in the finance ministry.

Caretaker Finance Minister Dr Shamshad Akhtar on Thursday said that work on IMF programme was under way, although Pakistan has not yet formally approached the Fund. She said that the caretaker government would hand over the plan to the incoming government.

Unlike the last programme, Pakistan’s chances of getting an IMF bailout on favourable terms are not very high due to explicit opposition by the United States. US Secretary of State Mike Pompeo has already warned against the IMF bailout being used to repay Chinese debt, extended in large part due to CPEC, to Pakistan.

The caretaker finance minister reiterated that there was no relation of CPEC with the IMF programme.

She said that there was no immediate pressure on the government for loan repayments, as some major debt and interest payments were due in the second quarter of this fiscal year.

To a question, the minister said that the value of dollar-rupee parity is decided by market forces and it is difficult to forecast the exact value.

Shamshad said that Pakistan was facing challenges of acute macroeconomic instability and fiscal deficit. The country needs strict financial discipline and consistent policies to overcome this challenge.

She stated that the government needs to take on board experts and modernise statistical data production services, which would ultimately help in effective policymaking and rationalising goals.

Umar said on Wednesday that the PTI would set up two consultative forums – an Economic Advisory Council and a Business Advisory Council. He said the prime minister will himself chair the EAC meeting.