IDB offers $500 million loans for import finance

The Islamic Development Bank (IDB) has offered Pakistan a soft-term loan of $500 million with low mark-up for import finance facility.
Sources told Business Recorder here on Wednesday that the IDB offer was under consideration, but Pakistan sought more concessions from the bank.
They proposed the IDB visiting official to provide the loan with only 2 percent mark-up (0.7 percent interest rate and 1.3 percent service charges).
The IDB loans were available in the past at around 6 to 8 percent mark-up and this is for the first time that the bank has offered the loan on relatively very low mark up, the sources said.
The government is looking for more concessions and wants the mark-up rate at around 1 percent. Pakistan had already decided in principle not to accept loans from international banks and donor agencies on high mark-up rates.
The country has achieved economic stability. The economy is at take-off stage, and the government has decided to move to a market-based borrowing economy.
In this perspective Pakistan had already informed the International Monetary Fund (IMF) that the ongoing Poverty Reduction and Growth Facility (PRGF) programme is going to be the last such programme, ending in November 2004.
The IDB official who is in Islamabad for over two weeks held discussions on the proposed loan with officials of Finance Division, Planning and Development Division, Economic Affairs Division, Pakistan State Oil and Water and Power Development Authority (Wapda).
According to preliminary proposal of the bank, the loan would be repaid in 10 years time. However, the sources said that every aspect of the proposal would be looked into before finalisation of the loan.
The government has directed all the concerned ministries to prefer soft-term loans from the donor banks and agencies so that the country could save money from retiring international debt, the sources added.
Over the last four years concerted efforts were made to improve the country's macro-economic environment through prudent fiscal, monetary and exchange rate policies. At the same time, wide-ranging structural reforms were introduced to lay the foundation for sustained growth reducing poverty, the sources said.
They said that the IDB has also offered $ 300 to 400 million to support the finances of the National Refinery Limited where the bank has its own share of 10 percent.