Pakistan received the much-awaited Chinese commercial loan of $2.3 billion on Friday, which improved the country’s foreign exchange reserves back into double digits at over $10 billion.
The Chinese loan, which has been rolled over, is the first significant inflow in the past six months that has increased the country’s capacity to make international payments and avert the chances of default on import payments and foreign
debt repayment.
Pakistani currency, however, failed to maintain an upward trend for the second consecutive day after making a historic recovery, as it dropped 0.12% (or Rs0.25) to Rs207.48 against the US dollar in the inter-bank market on Friday.
Finance Minister Miftah Ismail wrote on his official Twitter handle, “I am pleased to announce that the Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into the SBP account today (Friday), increasing our foreign exchange reserves.”
The country’s foreign exchange reserves had depleted around $8 billion in the past six months to a 32-month low at $8.23 billion in the week ended June 17, 2022, the central bank reported in its latest update on Thursday.
“The drop in foreign exchange reserves and the robust recovery of the rupee above market expectations (of Rs4.70, or 2.22%, on Thursday) … prevented the currency from maintaining the upward trend on Friday,” a leading analyst said while talking to The Express Tribune.
“The rupee is expected to gain further ground against the greenback after the receipt of Chinese loan.”
Pakistan had repaid the $2.3 billion commercial loan in March in the hope of getting it back in April. However, China placed a condition that the money could not be used due to the weakening external sector position
of Pakistan.
China also wanted Pakistan to remain committed to the International Monetary Fund (IMF) loan programme.
Earlier, Finance Minister Ismail announced that the IMF had agreed to resume its stalled loan programme.
The duration of the loan period is expected to be increased by one year to August 2024 along with the size of the loan package to $8 billion compared to $6 billion earlier.
Published in The Express Tribune, June 25th, 2022.
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