ISLAMABAD: The US pushes for preferred creditor status as it looks to lend $1 billion for the Reko Diq project, but Pakistan is cautious about the potential implications for future deals with other nations
The United States has renewed its request for preferred creditor status for its Export-Import Bank (Exim), which is set to provide $1 billion in financing for Pakistan’s Reko Diq gold and copper mining project. However, Pakistan remains hesitant to grant such a status, which is typically reserved for multilateral financial institutions.
US Ambassador to Pakistan Donald Blome raised the issue during a meeting with Finance Minister Muhammad Aurangzeb. While Aurangzeb assured the US envoy that Pakistan is reviewing the request, the government is cautious about extending this privilege, fearing it could lead to demands from other nations like China. Pakistan traditionally grants preferred creditor status only to entities like the World Bank.
The Exim Bank has shown keen interest in lending $1 billion to $1.5 billion for Reko Diq. However, the Biden administration insists on preferred creditor status due to the project’s high credit risk. Several other international lenders, including the World Bank’s International Finance Corporation, the Asian Development Bank, and the Islamic Development Bank, have also expressed interest in financing the project.
Reko Diq, one of the world’s largest undeveloped copper and gold deposits, is estimated to cost between $6 billion and $6.5 billion, with $3.2 billion needed for debt financing. The project is 50% owned by Barrick Gold, 25% by the federal government, and 25% by the Balochistan provincial government. Barrick Gold is expected to complete feasibility updates by December 2024, with the first production phase anticipated in 2028.
The government has also received an offer from Saudi Arabia to buy a 15% stake in the project, but no decision has been made. As global demand for gold and copper increases, Pakistan hopes to develop further mining blocks in collaboration with multiple partners.
In his meeting with Blome, Finance Minister Aurangzeb also discussed Pakistan’s ongoing macroeconomic reforms, including efforts to boost tax collection and address challenges in the energy sector. While the government is committed to increasing its tax-to-GDP ratio, it has struggled to meet IMF targets, particularly in taxing traders.
Blome commended Pakistan’s reform efforts, especially in stabilizing the economy and addressing taxation challenges.
