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Pakistan

Chinese loan rollover of $2bn to Pakistan in process: source

  • Finance ministry official says it is a 'work in progress, formal documentation underway'
Published March 30, 2023

KARACHI: China is working on a request by Pakistan to roll over a $2-billion loan that matured last week, a top finance ministry official told Reuters.

The rollover is critical for the South Asian nation, as its foreign exchange reserves have dipped to just four weeks worth of imports at a time when it is locked in talks with the International Monetary Fund (IMF) to secure bailout funds.

“It is a work in progress,” the official said in a text message on Wednesday, on condition of anonymity. “Formal documentation is underway.”

IMF’s ingenious approach the only hurdle to bailout

A formal announcement will be made, the source added, but gave no further details. The loan matured on March 23.

As Pakistan struggles to avert a default on its obligations, the only help so far has come from longtime ally Beijing.

The IMF funding is critical for Pakistan to unlock other external financing avenues, and the two have been negotiating since early February to resume $1.1 billion in funding held since November, part of the bailout agreed in 2019.

One of the lender’s last remaining conditions for release of the tranche is securing an assurance on external financing to fund Pakistan’s balance of payments.

Pakistan’s ‘friends’: IMF wants commitments fulfilled: PM

The development comes as Pakistan reels from one of its worst economic crises in history. The South Asian country has been faced with a barrage of woes with a perceived default risk and downgrade by international ratings agencies reflecting the state of the economy that has also had to bear major political turmoil and frequent change in key leadership.

‘Pakistan is running out of time,’ warns PBC as IMF programme hangs in balance

The IMF programme’s revival has been deemed crucial to stabilise the economy that has been hit by a severe dollar shortage in recent months with reserves held by the central bank treading at critically low levels.

Last week, the IMF said it needs to ensure financing assurances are in place in order to take “the next step with Pakistan”.

“Timely financial assistance from external partners will be critical to support the authorities’ policy efforts and ensure the successful completion of the review with Pakistan,” the IMF’s Director of Strategic Communications stated in a press briefing on Friday.

“Ensuring that there is sufficient financing to support the authorities is the paramount priority. A Staff Level Agreement (SLA) will follow once the few remaining points are closed,” she said.

Comments

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Joe Mar 30, 2023 12:54pm
Just roll over? Iron brother? Why not waive it all?
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عمران خان رانديباز Mar 30, 2023 01:11pm
This loan matured last week which in other words means that Pakistan has already defaulted
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SAMIR SARDANA Mar 30, 2023 02:00pm
ALL IS MOVING SMOOTHLY IMF/WB/SAUDI/KUWAIT/PRC EVERY ONE IS HOLDING PAKISTAN WITH A TIGHT STRING ! THAT IS GOOD ! EXCELLENT ! AS THEY WILL MAKE EVERY USD COUNT IN EFFECT,PAKISTAN IS GETTING THE INTELLECT OF THESE BANKS AND NATIONS,FOR FREE + THEIR BILLIONS + A SECOND OPINION,ON ALL THE PLANS AND PROJECTS OF PAKISTAN ! PAKISTAN WILL SAIL THROUGH ! THERE WILL BE NO DEFAULT ! A FEW MONTHS BACK ,THERE WAS HUMBUG TALK OF CDS AND RATES ON PAKISTANI BONDS ON LSE ! ALL PANIC ! NOTHING WILL HAPPEN ! JIYE JIYE PAKISTAN ! LENDERS ARE "NOT" DRIVING,A HARD BARGAIN . JUST A REALISTIC DEAL. SAMIR SARDANA
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John Mar 30, 2023 02:01pm
What compromised Generals have wrought! A great mess! What they have promised to their masters!
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Love Your Country Mar 30, 2023 02:03pm
@عمران خان رانديباز, The discussions for the role over had started so it's not a default
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Tulukan Mairandi Mar 30, 2023 02:05pm
Why is our IRON BROTHER not waiving this loan? Rollover at 7% interest is suicidal. Why does IRON BROTHER wanna kill us? Our PDM government must talk to China with leverage: Xinjiang genocide, business to Huawei, Abandoning CPEC, Joining US bloc, and Taiwan, should be on the cards. But our leaders are cowards.
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Tulukan Mairandi Mar 30, 2023 02:06pm
Due to the fact that Pakistan has already defaulted (loan was due last week), IRON BROTHER is now demanding 7% interest rate from us, an Islamic Country looking to abolish riba (interest) totally. IRON BROTHER is deliberately insulting and denigrating our faith.
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SAMIR SARDANA Mar 30, 2023 03:12pm
@Tulukan Mairandi, Why is our IRON BROTHER not waiving this loan? WAIVER MEANS CONDONING PAKISTAN FISCAL AND MONETARY MISMANAGEMENT. THAT MEANS NO LEARNING FOR PAKISTAN Why does IRON BROTHER wanna kill us? PRCIS HANDHOLDING PAKISTAN LIKE A PARENT HAND HOLDS A CHILD AT A TENDER AGE
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SAMIR SARDANA Mar 30, 2023 03:22pm
@Tulukan Mairandi, IRON BROTHER is now demanding 7% interest rate from us, PRC NEEDS EXPORTS FOR POLITICAL AND ECONOMIC STABILITY,SO PBOC WILL HOLD THE YUAN OR DEPRECIATE IT SLOWLY, IN REALITY THE YUAN HAS TO BE REVALUED SO PAKISTAN HAS A 7% LOAN, AT NIL FX RISK (ESPEC,IF PBOC PEGS YUAN TO PKR) NOW 7% IS REQUIRED SINCE PAKISTAN WILL USE THIS CASH FOR VARIOUS PROJECTS AND PURPOSES.FOR MANAGEMENT COSTING AND DECISION MAKING THE MONEY HAS TO BE COSTED AND THE PROJECTS HAVE TO BEAR A FAIR COST LOAD MOREOVER,THIS INTEREST WILL BE WAIVED BY PRC AT THE END OR SWAPPED WITH REKO DIQ EQUITY OR SOME CPEC SWAP. WHAT IS THE ALT FOR PRC ? THE OPPORTUNITY COST OF INVESTING THE CASH IN CHINA INFRA, IS VERY LOW.NEXT BEST ALTERNATIVE IS US T BILLS FOR PRC. INTEREST WILL IMPOSE MANAGEMENT PRUDENCE ! SAY YOU LOAN FROM NATION X AT 0% ROI .1 YEAR AGO ,USD INDEX WAS 98 AND TODAY IT IS 103,IN EFFECT THAT IS A 5% DEEMED INTEREST FOR PAKISTAN
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bonce richard Mar 31, 2023 04:16am
@Tulukan Mairandi, Who trust on us since 1947 we are begging for money from others.
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