KARACHI: The country has received inflows amounting to $700 million from China to build the sliding foreign exchange reserves. Recently, China Development Bank (CDB) had approved a loan facility of $700 million for Pakistan to ease its cash crisis.
After meeting the loan formalities, the pledged amount has arrived into the State Bank of Pakistan (SBP) account on Friday.
“Yes, the State bank has received $700 million from China as loan,” the SBP spokesman confirmed to Business Recorder.
China Development Bank approves $700mn facility for Pakistan: Dar
Analysts said that these inflows will help shore up the country’s depleting foreign exchange reserves. Pakistan for the last one year is facing a serious cash crisis and is in dire need of foreign inflows to meet its external obligations and avoid default.
Currently, the SBP’s foreign exchange reserves stand at around $3.25 billion as on February 17, 2023 and hardly enough to cover 20 days imports. With the arrival of CDB inflows, the SBP’s reserves are likely to rise to $3.9 billion, if no major external debt payment was made. China continues to enhance its support for Pakistan’s economic stability in a difficult time and overall, it has provided $3 billion financial support in the shape of loans during the last 8 months.
Previously, in June last year, Pakistan signed a commercial loan deal of RMB 15 billion with a Chinese consortium of banks to boost the sliding foreign exchange reserves of the country. Accordingly, an agreed Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) was credited into SBP account on June 24, 2022.
The government is also negotiating with the International Monetary Fund (IMF) for disbursement of $1.1 billion of the Extended Fund Facility (EFF) program. The government has recently announced a mini budget to fulfil the IMF conditions for release of EFF tranche. Hopefully, the Fund is likely to make a decision on the release of the EFF tranche next week.
Finance Minister Ishaq Dar believes that with the arrival of these inflows, the country’s forex reserves’ situation would be improved by end-June.
Copyright Business Recorder, 2023
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