Another proposal was to seek fresh Chinese loans to pay off the bilateral debt. (Representative)
Islamabad:
According to a media report, Pakistan has requested China to rollover its USD 6.3 billion loan, which is to make arrangements for USD 34 billion in the current financial year to meet its debt and external trade-related obligations. Maturing over the next eight months as part of its overall plan. Report on Sunday.
Another proposal, which expires on June 30, is also being considered for repaying the bilateral debt maturing during the financial year 2022-23, the Express Tribune newspaper reported.
The issue of rollover and refinancing of commercial loans and central bank loans of about USD 6.3 billion was discussed in a meeting held on Saturday between Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar, the paper said.
According to finance ministry officials, Chinese commercial loans worth US$3.3 billion and safe deposit loans worth US$3 billion were maturing from now until June next year.
The safe deposit is on the balance sheet of the central bank.
In addition, over US$ 900 million in bilateral Chinese debt was being outstanding during the current fiscal.
For the current fiscal year, the International Monetary Fund and the Ministry of Finance have estimated Pakistan’s gross external financing needs in the range of USD 32 billion to USD 34 billion, excluding the impact of the recent devastating floods.
Pakistan has already secured a loan of USD 2.2 billion during the July-September quarter, while Saudi Arabia has announced a rollover of a loan of USD 3 billion maturing in December this year.
The country still needs to arrange USD 29 billion and is looking for a minimum rollover of USD 6.3 billion to USD 7.2 billion from China in addition to any fresh loans.
Citing sources, the paper said this time the government is seeking a rollover of the $3 billion safe deposit for three to five years to more than one year.
China has expanded a total of USD 4 billion in safe deposits and out of this USD 1 billion has already been rolled out in July this year.
Prime Minister Shahbaz Sharif is visiting Beijing on November 1 with a long list of new projects and requests for rollover of existing loans, considering approval of new loans and preferential trade treatment for certain exportable goods .
The cash-strapped country has been under pressure from Western institutions and governments to demand a rollover of Chinese debt, which currently stands at US$26.7 billion, including public and publicly guaranteed loans.
Chinese commercial loans cannot be rolled over but can be refinanced, requiring the government to first pay off the matured loan and then withdraw it.
This takes significant time, which in turn puts pressure on foreign exchange reserves until the transaction is reversed.
China took three months to refinance a USD 2.3 billion commercial loan repaid by Pakistan in March. The gross foreign exchange reserves of Pakistan currently stand at US$ 7.5 billion.
“The finance minister also appreciated the support extended by the Chinese leadership for flood relief and refinancing of syndicate facilities worth $15 billion ($2.24 billion) to Pakistan,” according to a statement issued by the finance ministry after the meeting.
The statement shows that the two sides discussed the issue of commercial loan refinancing.
International credit rating agency Fitch on Friday highlighted the contradictory debt rollover statements made by Pakistani policy makers.
“The previous finance minister had said before resigning that Pakistan would seek debt relief from non-commercial creditors. Prime Minister Shahbaz Sharif also appealed for debt relief within the Paris Club framework. Recently, however, finance The minister (Ishaq Dar) publicly ruled it out,” Fitch said.
Fitch downgrades Pakistan to the high-risk loan category.
Dar made the right decision to withdraw a proposal seeking Paris club debt restructuring. The Paris Club loan rescheduling decision was troubling global markets.
The Finance Minister highlighted the economic challenges and policies of the present government with the aim of bringing about economic and fiscal stability, his ministry said.
Sources said the two sides also discussed the issue of outstanding sugar dues on account of payments to Chinese independent power producers towards the cost of power purchase.
It is expected that Pakistan will resolve the pending issue of opening bank accounts to save Chinese companies from the vicious circle of circular loans before the visit of the Prime Minister.
The finance ministry said Sharif’s proposed visit to China was also discussed in the meeting and both sides are hopeful that this will strengthen bilateral ties between the two countries.
According to the statement, Dar assured his full support for the successful implementation of the China-Pakistan Economic Corridor (CPEC) projects.
Rong reaffirmed the Chinese government’s continued support to Pakistan and thanked Islamabad for facilitating Chinese companies in various projects in the country.
Rong also assured full support and cooperation of the Chinese government in developing the Special Economic Zone as part of the CPEC.
The issue of changing the design and scope of the 300 MW Gwadar imported coal-fired power plant also came under discussion.
Pakistan wants to postpone the plan due to the high cost of imported fuel and its preference for local resources.
China Communications Construction Group (CCCG) had planned to set up the plant at a cost of USD 542 million. But diplomatic sources said the Chinese government was unwilling to either convert the fuel to LNG or use Thar coal because of its high cost.
Pakistan cannot make any unilateral changes to the project and will have to submit its decision to the approval of the JCC, which creates the strategic plan for the CPEC.
According to the newspaper, the meeting of JCC is to be held on October 27.
The International Monetary Fund (IMF) on August 29 approved the release of a USD 1.17 billion tranche to the cash-strapped country, providing much-needed budgetary support to meet the fiscal and external deficit.
Despite the distribution of the IMF tranche, the economic situation remains precarious.
The devastating floods, which have killed more than 1,700 people and displaced more than 30 million, have further exacerbated Pakistan’s foreign exchange crisis, causing an estimated loss of more than US$30 billion to the economy.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)