IFC & Engro Fertilisers Secure Landmark PKR Financing to Bolster Pakistan’s Agriculture & Food Security
Islamabad, Pakistan – A meaningful investment by the International Finance Corporation (IFC) in Engro Fertilisers marks a pivotal moment for Pakistan’s agricultural sector, unlocking access to crucial long-term financing in local currency. This innovative financing structure, facilitated in partnership with Standard Chartered Bank, is poised to strengthen the agri-value chain, enhance food security, and drive economic growth within the nation.
This represents the IFC’s first local currency investment in Pakistan, a strategic move designed to mitigate the risks associated with foreign exchange fluctuations and promote the utilization of domestic capital markets. For years, Pakistani businesses have faced challenges securing long-term funding in PKR, often relying on borrowing in US dollars and exposing themselves to significant currency risk. This new facility directly addresses that issue,fostering greater financial resilience.
Addressing Critical Needs in Pakistan’s Agricultural Landscape
The investment will enable Engro fertilisers to undertake vital capital expenditures, focusing on the maintenance and turnaround of existing facilities. This ensures the uninterrupted supply of essential fertilizers - urea and others – to meet Pakistan’s national demand. Beyond production, the funding will also support and expand Engro’s existing farmer programs, providing crucial resources and expertise to the agricultural community.
The importance of this investment cannot be overstated. Agriculture is the backbone of the Pakistani economy, contributing a substantial 24% to the nation’s GDP, accounting for 70% of its exports, and providing employment for 40% of the workforce. However, the sector faces systemic challenges including inefficient supply chains, underinvestment in farmer support, limited literacy rates, and escalating input costs. This financing aims to directly address these gaps, fostering a more robust and sustainable agricultural ecosystem.
A multi-Layered Approach to Risk Mitigation & Sustainable Growth
The deal is further strengthened by a first-loss counter guarantee provided by IFC-Canada’s Facility for Resilient Food Systems. This guarantee de-risks the investment, encouraging greater participation from local financial institutions and ensuring the long-term viability of the project.
“Engro has always strived to solve Pakistan’s most pressing issues meaningfully,” stated Ali Rathore, Chief Executive Officer of Engro Fertilisers. “Using local capital to strengthen local value chains reflects our commitment to the country and to our farmers – the backbone of Pakistan’s economy – through reliable fertiliser production. We are grateful to our partners, IFC and Standard Chartered Bank, for enabling us to advance this mission.”
IFC & Standard Chartered: A Commitment to Pakistan’s Future
Ashruf Megahed, IFC’s Regional Industry Head of Manufacturing, Agribusiness and Services in the Middle East and Central Asia, emphasized the strategic importance of the partnership. “This investment reflects the strength of our partnership with Engro Fertilisers and Standard Chartered Bank and our shared commitment to providing innovative solutions to address challenges in a sustainable manner. Through this project, we are opening new pathways for local currency long-term financing that support growth and financial resilience to manage country risk in a sector vital to the country’s economy.”
Rehan Shaikh, Chief Executive Officer and Head of Coverage in Pakistan at Standard chartered, echoed this sentiment. “at Standard Chartered, we are committed to financing solutions that enable sustainable growth and long-term resilience across Pakistan’s economy. This partnership with IFC and Engro Fertilisers reflects our shared vision of strengthening food security and supporting one of the country’s most critical value chains. Standard Chartered is keen to continue working with IFC to replicate this accomplished structure across its network.”
Building on Recent SBP Initiatives
This landmark financing follows closely on the heels of a recent agreement between the State Bank of Pakistan (SBP) and the IFC, signed in October 2023 under the International Swaps and Derivatives Association (ISDA) framework. This agreement allows the IFC to invest directly in Pakistani Rupees, further bolstering the development of local currency financing options for the private sector. The SBP’s proactive approach, combined with the IFC’s investment, signals a strong commitment to strengthening Pakistan’s financial infrastructure and fostering sustainable economic growth.
Key Takeaways:
* Local Currency Focus: the investment prioritizes PKR financing, reducing exchange rate risk for Engro Fertilisers and promoting the development of domestic capital markets.
* Agricultural Resilience: The funding will strengthen Pakistan’s agricultural value chain, ensuring a stable supply of fertilizers and supporting farmer programs.
* Food Security Enhancement: By bolstering fertilizer production, the investment contributes directly to Pakistan’s food security objectives.
* Strategic Partnership: The collaboration between IFC, Engro Fertilisers, and Standard Chartered Bank demonstrates a shared commitment to sustainable economic development in Pakistan.
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