SBP and IFC Sign Landmark Deal to Boost Local Currency Financing in Pakistan

The State Bank of Pakistan has partnered with the International Finance Corporation to boost local currency financing, reduce exchange rate risks, and support private sector growth. The agreement aims to enhance investment in Pakistani rupees, promote economic resilience, and create new opportunities for businesses across the country.

Islamabad, October 21, 2025 — The State Bank of Pakistan (SBP) has signed a strategic agreement with the International Finance Corporation (IFC), a member of the World Bank Group, aimed at strengthening local currency financing and supporting private sector growth in Pakistan, the central bank announced on Monday.

The partnership, formalized under the International Swaps and Derivatives Association (ISDA) framework, is designed to help the IFC manage currency risks more effectively while increasing its investments in Pakistani rupees. The move is expected to reduce reliance on foreign currency borrowing, which exposes companies to exchange rate fluctuations that can inflate debt obligations when the local currency depreciates.

In a statement, the SBP said, “This is an important step towards unlocking financing for critical sectors of the economy and creating jobs across the country.” Governor Jameel Ahmad emphasized that promoting private sector growth is “paramount to successful, sustainable economic development of the country” and that the partnership with the IFC would significantly expand financing opportunities for businesses operating in Pakistan.

John Gandolfo, IFC Vice President and Treasurer for Treasury and Mobilization, highlighted the importance of local currency financing for developing economies. “With currency volatility posing significant risks, access to local currency financing has never been more important. Promoting this type of financing is a strategic priority for the World Bank Group and a catalyst for economic growth in Pakistan,” he said.

The statement noted that many companies in developing economies face significant challenges when borrowing in hard currencies such as the US dollar while generating revenues in local currency. By converting loans into Pakistani rupees, companies can better manage exchange rate risk, ensuring greater financial stability.

“The IFC is committed to leveraging innovative financial instruments and strengthening partnerships to address the growing need for local currency financing in emerging markets. Through this partnership, the SBP aims to bolster economic resilience, promote private sector development, and improve foreign exchange liquidity in Pakistan,” the statement added.

This development comes shortly after Finance Minister Muhammad Aurangzeb’s week-long visit to Washington, where he engaged with senior officials of the IFC and the Islamic Development Bank (IsDB) to discuss private sector investment, infrastructure financing, and development cooperation. During his meeting with Riccardo Puliti, IFC Regional Vice President, the minister highlighted Pakistan’s improving macroeconomic indicators and underscored the importance of deepening IFC’s partnership with the country.

Aurangzeb welcomed the IFC’s regional office in Islamabad, calling it a “significant step to deepen collaboration and support sustainable investment in Pakistan.” Both sides agreed to work toward the early financial closure of the IFC’s flagship Reko Diq project and further expand multi-billion-dollar private sector investments under the 10-year Country Partnership Framework.

The SBP-IFC agreement represents a crucial initiative to enhance private sector financing in Pakistan, mitigate currency risks, and foster sustainable economic growth amid ongoing global financial volatility.