Pakistan has refused a $490 million commercial loan from the Islamic Development Bank Group after officials said the borrowing cost was too high.
The one-year financing facility was offered by the International Islamic Trade Finance Corporation, a member of the Islamic Development Bank Group, with an overall cost of about 8%.
Debt-management authorities had hoped for a rate nearer 6%, and the roughly two-percentage-point gap made the proposal unattractive, prompting the rejection.
The Finance Ministry estimates the country's gross financing needs at roughly 20% of GDP, underscoring the scale of funding required.
Because borrowing costs remain a key factor, the government has tasked the Economic Affairs Division with seeking alternative loans at more competitive rates.
The decision reflects a focus on limiting new borrowing costs while handling broader financing needs, as expensive commercial financing could raise debt-service burdens.
The rejected loan was for a one-year term, meaning a relatively short repayment period.
Officials are now expected to explore other funding sources to meet the nation's financing requirements.
Further arrangements will hinge on whether the Economic Affairs Division can secure a lower-cost facility.
