- In total, China has renovated more than $4.3 billion in loans.
- It provided $2.3 billion in commercial loans and $2 billion in safe deposits.
- The International Monetary Fund linked the release of his loan to the assurances of friendly countries.
ISLAMABAD/KARACHI: China has renewed a $2 billion loan in the form of a one-year State Administration Foreign Exchange (SAFE) deposit for the cash-strapped Pakistani economy amid dwindling foreign exchange reserves. news learned Wednesday.
“China rolled over three safe deposits. The first deposit of $500 million was due on June 27, 2022, the second of $500 million was due on June 29, 2022, and the third of $1 billion was due on July 23, 2022. The 2 China safe deposits were rolled over One billion dollars for one, said a senior official in the finance department news.
So far in total, China has renovated more than $4.3 billion in loans, including $2.3 billion in commercial loans and now $2 billion in safe deposits, making it possible for Islamabad to bridge the external financing gap with a whopping $35.9 billion. dollars for the current fiscal year. general.
The International Monetary Fund has tied the possibility of holding an interim Executive Board meeting by the end of this month once adequate funding guarantees are confirmed.
The resident representative of the International Monetary Fund in Islamabad, Esther Perez-Ruiz, said that Pakistan has completed the previous procedures for the seventh and eighth joint auditors of the expanded fund facility, following the Petroleum Development Tax increase on July 31. This indicates the resumption of the bailout plan, which has boosted investor confidence in the stability of the economy.
However, the International Monetary Fund linked the holding of its executive board meeting with the confirmation that Saudi Arabia and the United Arab Emirates will provide an expected $4 billion loan to the country after the IMF launches its tranche.
The Pakistani authorities are awaiting confirmation from friendly countries, especially Saudi Arabia, Qatar and the UAE, to fill the $4 billion financing gap set by the International Monetary Fund to materialize the total external financing requirement of $35.9 billion for the current fiscal year.
Saudi Arabia may confirm raising the oil facility on deferred payments of $1.2 billion, bringing the total oil facility to $2.4 billion.
Pakistan and the International Monetary Fund are also discussing the possibility of converting one billion SDRs into US dollars for Islamabad. But this conversion to the SDR could take some time because it was just an option for which the mechanism had to be put in place.
The UAE may show interest in acquiring shares of state-owned companies, particularly in the oil and gas sector, but it will take a few months to realize such business transactions.
The potential for deferred payment gas and LNG from Qatar will likely materialize soon as discussions on this topic continue. Selling LNG power plants to a friendly country will take some time, but could generate $2-3 billion in the national fund.
All these developments occurred at a time when foreign exchange reserves were being depleted at an accelerating pace. The foreign exchange reserves held by the State Bank of Pakistan reached $20 billion in August 2021, but decreased to $8.5 billion on July 22, 2022.
During the week ending July 22, 2022, SBP’s reserves fell by $754 million to $8.5 billion due to external debt and other payments.