Pakistan seeks $1 billion IMF funding from climate resiliency fund

Pakistan has formally requested $1 billion in funding from the International Monetary Fund (IMF) through its Climate Resiliency Trust (CST).

The country aims to finalize this request in the coming months. Finance Minister Muhammad Aurangzeb announced this during an interview with Reuters at the IMF/World Bank autumn meetings in Washington.

Pakistan is highly vulnerable to climate change, as highlighted by the Global Climate Risk Index.

The CST, established in 2022, offers long-term concessional funding for climate-related projects, including adaptation measures and transitioning to cleaner energy sources.

In 2022, Pakistan experienced catastrophic floods, which scientists attribute to global warming. These floods affected at least 33 million people and resulted in over 1,700 deaths. The disaster severely impacted the country's economy, which was already struggling with high debt.

The floods caused extensive damage, destroying crops, washing away structures, and leading to significant loss of life and livestock. The World Bank reported in October 2022 that the total damage from the floods exceeded $14.9 billion, with economic losses around $15.2 billion.

The estimated cost for rehabilitation and reconstruction is at least $16.3 billion, excluding new investments needed for climate adaptation and resilience.

The most affected sectors were housing ($5.6 billion), agriculture and livestock ($3.7 billion), and transport and communications ($3.3 billion). Sindh province suffered the most, accounting for nearly 70% of the total damages and losses, followed by Balochistan, Khyber Pakhtunkhwa, and Punjab.

Initially, the government planned to seek climate change financial support earlier but decided to wait for the IMF's approval of a $7 billion loan package, which spans 37 months.

Of this amount, $1 billion has already been released, boosting the State Bank of Pakistan's foreign exchange reserves from $4.4 billion to $10 billion over the past year.

Additionally, Pakistan is negotiating with the Asian Infrastructure Investment Bank for credit enhancement for a planned Panda bond, targeting an initial issuance of $200-250 million by the end of June.

Aurangzeb also mentioned that Pakistan is in discussions with Middle Eastern banks for commercial loans, with one bank submitting a significant proposal.