A Chinese bank has assured Pakistan that it will provide another refinance loan of USD 500 million.
Islamabad:
The News International reported that a Chinese bank has assured Pakistan that it will provide a refinance loan of USD 500 million within the next few days, bringing it up to USD 1.7 billion out of the total committed amount of USD 2 billion. Total commercial loan will be received.
Pakistani officials are scrambling to get 100 per cent confirmation from friendly donor countries and multilateral creditors before moving towards a staff-level agreement with the International Monetary Fund (IMF). It was an unwritten condition of the IMF that Pakistan should secure rollover on deposits from China during the program period, along with refinancing of commercial loans, which is due to end in June 2023.
“Another USD 500 million commercial loan is coming from a Chinese bank,” a top Pakistan finance department official confirmed on Wednesday, The News International reported.
Chinese banks have provided refinancing of USD 1.2 billion in commercial loans over the past few weeks, and now Beijing has assured USD 500 million in loan refinancing over the next few days.
It is pertinent to mention that Pakistan had also requested for rollover of Chinese safe deposits of USD 2 billion within the current month.
All these, refinancing of commercial loans and rollover on safe deposits, are pre-requisites for moving towards the signing of a staff-level agreement between the IMF and the Pakistani side.
Now Pakistani officials are anxiously awaiting confirmation from Saudi Arabia, the UAE and Qatar as well as the World Bank and the Asian Infrastructure Investment Bank (AIIB) to meet their US$6 billion external financing needs. In late June 2023, The News International reported.
The guarantee of securing external financing is important for the sustainability of the IMF programme, as it is difficult for the State Bank of Pakistan to increase its foreign exchange reserves to USD 8-10 billion by the end of June 2023. However, the staff estimated them at US$ 16 billion in August 2022 after completing the seventh and eighth reviews under the Extended Fund Facility of US$ 6.5 billion.
It will be very difficult for the IMF staff to defend the 50 percent reduction in the foreign exchange reserves held by the State Bank of Pakistan (SBP) when Pakistan’s economy has not suffered any setbacks on the external front. But Pakistani officials argued that the flash floods had devastated many parts of Pakistan, causing a loss of US$30 billion to the economy.
There is a good news for Pakistan’s economy: Brent crude has broken at $74.39 and West Texas Intermediate (WTI) at $68.16 per barrel in the international market.
Meanwhile, the IMF on Wednesday secretly launched “Inclusive Growth in the Middle East/North Africa (MENA) Region” at the National University of Sciences and Technology (NUST), with presentations by an IMF high-ranking official who argued Given that anywhere state-owned enterprises (SOEs) had a major footprint, this resulted in a crowding out of the private sector.
Pakistan’s budget makers also assured the IMF that they will prepare a gender-based budget in the next financial year.
At a time when the IMF is putting its focus on inclusive growth in its books, it launched, practically under the IMF’s strict scrutiny, the development budget of the federal government, known as the Public Sector Development Program (PSDP). was reduced by 50 percent. per cent for the current financial year in line with the demand for funds to reduce the budget deficit target.
To meet the IMF’s demands, Consumer Price Index (CPI) based and Sensitive Price Indicator (SPI) based inflation has reached unprecedented levels of 31.5 per cent per month and 42.3 per cent per week.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)