China deposits $2.3 billion to boost SBP reserves

The inflow will increase sliding foreign exchange reserves, says Finance Minister Miftah Ismail

China has deposited $2.3 billion in State Bank of Pakistan (SBP) to boost Pakistan’s sliding foreign exchange reserves, Finance Minister Miftah Ismail announced on Friday.

“I am pleased to announce that Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into SBP account today, increasing our foreign exchange reserves,” he wrote on his official Twitter handle.

I am pleased to announce that Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into SBP account today, increasing our foreign exchange reserves.

— Miftah Ismail (@MiftahIsmail) June 24, 2022

The development came two days after China signed a $2.3 billion commercial loan deal with Pakistan, as the government waits for the rollover of three more maturing loans totalling $2 billion.

The official foreign exchange reserves stood in single digits at $8.24 billion. However, these loans will give it a boost, opening blocked financing pipelines.

Pakistan had repaid the $2.3 billion commercial loan in March in the hope to get it back in April. However, China had placed a condition that the money could not be used due to weakening of the external sector position of Pakistan.

China also wanted Pakistan to remain committed to the International Monetary Fund (IMF) loan programme.

Also read: $2.3b loan deal inked with China

On Tuesday, the finance minister had announced a deal with the IMF on budget numbers, aligning the figures with the global lender’s assessments of revenues and expenditures for the next fiscal year.

The government has also accepted some of the tough conditions for the sake of reaching a deal with the IMF.

The global lender’s Resident Representative Esther Perez said on Wednesday in a brief statement that “discussions between the IMF staff and the authorities on policies to strengthen macroeconomic stability in the coming year continue, and important progress has been made over the fiscal year 2022-23 budget”.

However, finance ministry officials said that the understanding reached with the IMF on the budget would help complete the legislation process before the end of the ongoing fiscal year on next Thursday.

Also read: ‘Broad agreement’ reached with IMF to end uncertainty

In March 2019, the China Development Bank had extended a commercial loan for three years at a six-month China Shanghai Interbank Offered Rate (SHIBOR) plus 2.5%.