Indian private Company taking cheaper Loans than Pakistan

The government of Pakistan has struck a $600 million commercial loan deal with Standard Chartered Bank, London at the interest rate of around 11%, reported country’ English newspaper The Express Tribune on Saturday. The interest rate for this loan deal is the highest in Pakistan’s history, according to the report. Meanwhile, in year 2022, an Indian private firm secured $1.5 billion at 2.875 per cent interest rate, which is far cheaper than the government of Pakistan’ loan deal. The recent expensive loan is being managed to qualify for approval of a $7 billion International Monetary Fund (IMF) bailout package, the report added.

Interest Rates: Indian Firm vs Pakistan!

This latest loan deal of Pakistan is at much higher rate when compared to an Indian private company “Reliance Industries Ltd”, which have raised much higher amounts of foreign loans at much cheaper rates. For example, In January 2022, this Indian firm had raised $4 billion in a three tranche US-dollar bond issue: $1.5 billion in a 10-year tranche at 2.875 per cent coupon rate, $1.75 billion in a 30-year deal at 3.625 per cent rate, $750 million in a 40-year deal at 3.75 per cent coupon rate, as was widely reported by Indian and International media outlets.

The recent $600 million borrowing by Government of Pakistan is high-priced than a private Indian firm. Pakistani Social Media users have raised questions on this costly loan deaI.

It’s PMLN v PMLN!

Earlier in 2015, when Nawaz Sharif was the Prime Minister and Ishaq Dar was his Finance Minister, government had issued a 10-year $500-million Eurobond at the high rate of 8.25%. This was the time, when the Indian firm Reliance had raised (a 10-year) $1 billion from bond sale to a coupon rate of 4.125% only. The decision to raise $500 million loan at 8.25 percent rate was severely criticised by Parliamentarians at that time. A meeting of Senate Standing Committee on Finance, which was chaired by Senator Saleem Mandviwala had termed issuance of $500 million Eurobond by the Nawaz Sharif government at 8.25 per cent interest rate a “flawed decision” and stated that Pakistan may now be rated in global bond market with countries like Kenya and Zambia.

Now, after 9 years, the younger Sharif’s government has decided to take $600 million loan at even more expensive rate.