Another trusted friend has jumped into the fray to help shore up Islamabad’s fast depleting state coffers. China has signaled its willingness to provide $2.5 billion in loans to Pakistan to boost official foreign exchange reserves that are not sufficient to provide cover to even two months of imports despite receiving $4 billion loans from two Middle Eastern countries.
With this cash injection, China’s contribution in this fiscal year alone would jump to $4.5 billion. In July, China had also deposited $2 billion with the State Bank of Pakistan. In the past five years, China has emerged as Pakistan’s single largest saviour in times of economic crisis. The money is coming as part of the government’s strategy to secure breathing space till the time its macroeconomic stabilisation measures take effect. After coming into power, Prime Minister Imran Khan had visited China, Saudi Arabia and the UAE to arrange emergency loans to avoid a looming default.
As a result, Pakistan has secured $14.5 billion worth of commitments from these three countries that have helped largely bridge the external financing gap of the ongoing fiscal year. The SBP Governor Tariq Bajwa on Thursday said the modalities for $3 billion oil on deferred payments were finalised this week and an agreement would be signed on February 16 during the visit of Saudi Crown Prince Mohammad bin Salman. Riyadh has already disbursed $3 billion. The UAE has agreed to provide $3 billion in loans at an interest rate of around 3% and has already disbursed $1 billion.
A $3.2 billion worth of oil facility on deferred payment is being awaited. Sources in the Finance Ministry said the immediate concern for the government is to keep the country financially afloat till the time the macroeconomic stabilisation measures start yielding positive results. However, the SBP governor on Thursday said despite these measures the current account deficit remained high, standing at $8 billion in six months. Let us hope the government will do the needful to lift the clouds of uncertainty from the country’s fiscal outlook.
Published in The Express Tribune, February 4th, 2019.
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