KARACHI: Pakistan on Friday night received $1 billion inflows from China as loan to build the depleting foreign exchange reserves.
Pakistan recently requested China for the fast-track refinancing of maturing commercial loans of $1.3 billion not only to build the country’s foreign exchange reserves but also meet the IMF’s condition of $ 6 billion financing for release of the next loan tranche.
Finance Minister Ishaq Dar, recently in a meeting with Pang Chunxue, the Charge d’Affaires of the Chinese Embassy in Pakistan raised the issue of refinancing as two Chinese commercial loans worth $1.3 billion are maturing in June. As per schedule, Pakistan was required to make a debt repayment of $300 million to the Bank of China and $1 billion to the China Development Bank this month.
Chinese official apprised of IMF ambivalence
During the meeting, Chinese authorities assured refinancing of both the loans.
Sources said that Pakistan has paid $ 1 billion to China Development Bank during this week and as per commitment, the loan has been refinanced by China. An official of State Bank of Pakistan (SBP) has also confirmed that some $ 1 billion have been received as loan.
For the last one year, Pakistan is facing a serious crisis of foreign exchange as foreign inflows are insufficient to meet the external debt servicing. Pakistan is making efforts to get the next tranche of IMF’s Extended Fund Facility (EFF) program, however, the loan tranche is still pending as the IMF has asked Pakistan to arrange $6 billion financing for the release of IMF funds.
Before the release of China’s $1 billion inflows on Friday, Pakistan had arranged $4 billion and with the arrival of this amount the total arrangement is $5 billion. The Federal Minister Finance is confident that a staff level agreement with the IMF will be materialized very soon.
Cumulative, Pakistan’s financing requirements for this fiscal year (FY23) were $33 billion including $10 billion of current account deficit and $ 23 billion of external debt. Despite a lower current account deficit, the country’s foreign exchange reserves are gradually depleting due to massive external debt payments and lower foreign inflows.
Copyright Business Recorder, 2023