KARACHI: Pakistan has signed term sheets with 18 commercial banks for a 1.275 trillion Pakistani rupee ($4.50 billion) Islamic finance facility to help pay down mounting debt in its power sector, government officials said on Friday.

The government, which owns or controls much of the power infrastructure, is grappling with ballooning “circular debt”, unpaid bills and subsidies, that has choked the sector and weighed on the economy.

The liquidity crunch has disrupted supply, discouraged investment and added to fiscal pressure, making it a key focus under Pakistan’s $7 billion IMF program.

Finding funds to plug the gap has been a persistent challenge, with limited fiscal space and high-cost legacy debt making resolution efforts more difficult.

“Eighteen commercial banks will provide the loans through Islamic financing,” Khurram Schehzad, adviser to the finance minister, told Reuters.

The facility, structured under Islamic principles, is secured at a concessional rate of 3-month KIBOR, the benchmark rate banks use to price loans, minus 0.9 percent, a formula agreed on by the IMF.

“It will be repaid in 24 quarterly instalments over six years,” and will not add to public debt, Power Minister Awais Leghari said.

Existing liabilities carry higher costs, including late payment surcharges on Independent Power Producers of up to KIBOR plus 4.5 percent, and older loans ranging slightly above benchmark rates.

Meezan Bank, HBL, National Bank of Pakistan and UBL were among the banks participating in the deal.

The government expects to allocate 323 billion rupees annually to repay the loan, capped at 1.938 trillion rupees over six years.

The agreement also aligns with Pakistan’s target of eliminating interest-based banking by 2028, with Islamic finance now comprising about a quarter of total banking assets.

ISLAMABAD: Pakistan has called on the International Atomic Energy Agency (IAEA) to clearly state its legal position on last week’s Israeli strikes targeting nuclear facilities in Iran while highlighting their grave implications for regional and international security.

The call came during an emergency meeting of the United Nations Security Council on Friday, after Israel launched airstrikes about a week ago that killed several senior Iranian military commanders and nuclear scientists, triggering a direct military confrontation between the two countries.

Israel’s attacks came as Tehran was engaged in negotiations with the United States to reach a nuclear agreement. Iran has repeatedly stated it has no intention of building nuclear weapons but will not surrender its right to a peaceful nuclear program or halt uranium enrichment activities.

Israel, however, contends that Iran is close to developing a bomb. The United States has backed Israel in the conflict and called for Iran’s “complete surrender,” insisting Tehran must not be allowed to obtain a nuclear weapon.

Pakistan, in its remarks to the Council, reiterated its condemnation of Israel’s “unjustified and illegitimate aggression,” describing the attacks on nuclear facilities as “deeply troubling.”

“It is the responsibility of the IAEA to clearly pronounce its legal position with regard to such attacks as well as to report to its Board of Governors and to the Security Council about the legal, safeguards, safety and security implications of such attacks,” Pakistan’s Ambassador to the UN, Asim Iftikhar Ahmad, told the Council.

“The Agency should fulfil that responsibility,” he added.

The Pakistani envoy also denounced Israel’s widening war in the Middle East, including in Gaza, Syria, Lebanon and Yemen. He maintained that Tel Aviv’s attack on Iran had further inflamed an already volatile regional situation.

Ahmad also said the UN Security Council must act decisively to halt Israel’s military actions and prevent the situation from spiraling further.

He urged the Council to categorically reject Israel’s actions, promote de-escalation and support a comprehensive ceasefire.

The Pakistani envoy further called on the Council to denounce the targeting of nuclear facilities safeguarded by the IAEA, pointing out that diplomacy must remain central to resolving the Iran-Israel crisis.

“Dialogue and diplomacy in full adherence to the principles of international law and the UN Charter remain the only viable path to resolving the crisis,” he said. “This Council must unite in support of the Secretary-General’s call to end the fighting and return to dialogue and negotiations.”

Ahmad also stressed that the IAEA must be allowed to continue its verification work “unimpeded,” and should operate in an “impartial and apolitical manner” to ensure credible and objective reporting on matters under its mandate.