By Muskan Naveed ISLAMABAD, Feb. 17 (INP-WealthPK): The government is planning to raise $1 billion through environmental, social and governance (ESG) Eurobond in the upcoming month. Finance Minister Shaukat Tarin revealed that the country will soon utilise the ESG bond instrument to focus on environmental development of the country, in light of growing climate change concerns. The funds will be used for development projects like clean water resources and improvement of rural landscape. This will be Pakistan’s first ESG bond issue. The ESG bonds have been gaining popularity especially in emerging markets as global ESG issuance rose from $75 billion in 2020 to a staggering $230 billion in 2021 with further expectations of a raise in the current calendar year. The sustainable capital-raising market is expected to reach $1.8 trillion in 2022, according to the Institute of International Finance. With the rise of green finance, ESG bonds have become a favorable channel to integrate capital-raising with sustainable economic output – especially in emerging markets as developing countries are more prone to environmental risks. The first ESG issuance of Pakistan will open new avenues for sustainable growth as ESG-based issuances also target a distinct and wider investor base. During the current fiscal year, Pakistan had also issued a Sukuk Bond of $1 in January 2022 and a Eurobond of $1 billion in July 2021 with a Panda Bond being under works, WealthPK reported. Moreover, the country has also received $1 billion under the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) program as the sixth review concluded successfully. The State Bank of Pakistan’s foreign exchange reserves have also witnessed a staggering increase by $1.61 billion during the past week on account of the Sukuk issuance and the IMF disbursement. IMF vs. bonds: Which one is better? On 2nd February, 2022, the IMF approved the sixth review of the EFF for Pakistan which led to immediate disbursement of $1 billion for budgetary support. The IMF-EFF is expected to be completed by September, 2023 with two additional reviews - which would mark the end of 22nd IMF program of Pakistan. IMF programs are considered to be, somewhat, controversial because of their increasing focus on austerity measures in the form of high taxation and decreased social spending. These policy reforms often spark debates in learned circles of Pakistan because they appear to impact the middle-income class the most. On this, seasoned economist Dr Sajid Amin Javed commented that the IMF programs are designed for a specific problem – external imbalances – hence, their reforms also enforce the solution for the very problem of countries reaching out to the lender as last resort, which may, at times, come at a cost. Given the trade-off that countries have to face with IMF programs, the incumbent government of Pakistan is aiming to put an end to further programs. Leading economists of the country – like Dr. Ashfaque Hassan Khan, Principal at NUST – also believes that Pakistan needs to implement curated policies targeting the country’s grass-root issues. Per Dr. Ashfaque, raising capital through bonds is one of the best alternatives for developing economies. Combining bonds with sustainability can lead towards a fast-paced economic recovery for Pakistan.