Pakistan seeks $6.3b China debt rollover

New proposal to seek fresh Chinese loan to repay maturing bilateral debt during FY 2022-23 also under consideration


Shahbaz Rana October 23, 2022
Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar discussed the issue of rollover and refinancing of nearly $6.3 billion commercial loans and the central bank debt in a meeting . PHOTO: APP

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ISLAMABAD:

Pakistan on Saturday requested China to rollover its $6.3 billion debt that is maturing in next eight months as part of its overall plan to arrange $34 billion in the current fiscal year to meet its debt and external trade-related obligations.

Another proposal was also under consideration to seek a fresh Chinese loan to repay the maturing bilateral debt during the fiscal year 2022-23, ending on June 30.

The issue of rollover and refinancing of nearly $6.3 billion commercial loans and the central bank debt was discussed in a meeting between Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar.

The $3.3 billion Chinese commercial loans and three $3 billion worth SAFE deposits loans were maturing from now till June next year, according to the Ministry of Finance officials.

The SAFE deposit is on the balance sheet of the central bank. In addition to this, over $900 million bilateral Chinese debt was becoming due during the current fiscal year.

For the current fiscal year, the International Monetary Fund and the Ministry of Finance have estimated Pakistan’s gross external financing requirements in the range of $32 billion to $34 billion, excluding the impact of the recent devastating floods.

Pakistan has already obtained $2.2 billion loans during July-September quarter while Saudi Arabia has also announced to rollover $3 billion debt maturing in December this year. The country still needs to arrange $29 billion and it is looking for minimum $6.3 billion to $7.2 billion rollovers from China in addition to any fresh lending.

Sources said that this time the government was seeking rollover of the $3 billion SAFE deposit for more than one year, preferably for three to five years. China has extended a total $4 billion in SAFE deposits and out of this $1 billion has already been rolled over in July this year.

Prime Minister Shehbaz Sharif is visiting Beijing on November 1 with a long list of new projects and requests to rollover the existing debt, considering sanctioning of new debt and preferential trade treatment for certain exportable goods.

Pakistan is under pressure from the western institutions and the governments to seek rollover of Chinese debt, currently standing at $26.7 billion including public and publicly guaranteed debt.

Chinese commercial loans cannot be rolled over but can be refinanced, which requires the government to first pay the maturing debt and then get it back. This consumes significant time, which in turn puts pressure on the foreign exchange reserves until the transaction is not reversed.

China had taken three months’ time in refinancing a $2.3 billion commercial loan that Pakistan paid back in March. Pakistan’s gross foreign exchange reserves currently stand at $7.5 billion.

“The Finance Minister also appreciated the support extended by the Chinese leadership for flood relief and refinancing of syndicate facilities of RMB 15 billion (US$ 2.24 billion) to Pakistan”, according to a statement issued by the Ministry of Finance after the meeting.

The statement suggests that both the sides discussed the issue of the commercial loans refinancing.

Fitch – the international credit rating agency – on Friday highlighted the contradictory debt rollover statements given by Pakistani policymakers.

“The previous finance minister said before resigning that Pakistan would seek debt relief from non-commercial creditors. Prime Minister Shehbaz Sharif also appealed for debt relief within the Paris Club framework. More recently, however, the Minister of Finance (Ishaq Dar) publicly ruled this out,” Fitch stated. It downgraded Pakistan to the highly risky debt category.

Dar took a right decision to withdraw the move of seeking Paris Club debt restructuring. The Paris Club debt rescheduling decision was unnerving the global markets.

The finance minister further highlighted the economic challenges and policies of the present government with the aim to bring about economic and fiscal stability, the finance ministry stated.

Sources said that both sides also discussed the issue of outstanding Chinese dues on account of payments to the Chinese Independent Power Producers for the cost of the electricity purchase.

Pakistan is expected to solve the lingering issue of opening a bank account to save the Chinese companies from the vicious cycle of circular debt before the PM’s visit.

The proposed visit of PM Shehbaz to China was also discussed in the meeting and both sides hoped that it would enhance bilateral relations between both the countries, the finance ministry said.

Dar assured his full support for the successful implementation of CPEC projects, according to the statement.

Rong reaffirmed the Chinese government’s continued support to Pakistan and thanked Islamabad for facilitating Chinese companies in various projects in Pakistan, it added.

He also assured full support and cooperation of the Chinese Government in developing Special Economic Zones as part of CPEC.

The issue of changing the design and scope of a much-delayed 300 megawatts Gwadar imported coal-fired power plant also came under discussion. Pakistan wants to shelve the plan due to the high cost of imported fuel and its preference for local resources.

The China Communications Construction Group (CCCG) had planned to set up the plant at a cost of $542 million. But diplomatic sources said that the Chinese government was not keen to either change the fuel to LNG or use Thar coal due its high cost.

Pakistan cannot make any unilateral change in the project and will have to place its decision before the JCC for endorsement, which makes strategic planning for CPEC.

The JCC meeting is scheduled to be held on October 27.

COMMENTS (4)

test1 | 2 years ago | Reply Even i am questioning myself and that is Will China ever move its factories to Pakistan to prove its friendship Will China ever move its factories from india to Pakistan Are Pakistan China really friends Why China gives loan to Pakistan instead of industries Ans Kill establishment politicians businessmen and policy makers. They are the most corrupt persons which originate from corrupt people of our country that is because we are corrupt. In the past everyone believed in Brotherhood Caste Nepotism Religious Sectarianism and Provincialism which has destroyed the foundations of the country and gave rise to corrupt ruling class which has destroyed our country beyond our imagination.
test | 2 years ago | Reply One thing i want my nation to remember for God s sake please don t forget it. Things good countries don t do 1-They will not give loans 2-They will not take loans Things good countries do 1-They will give industries 2-They will take industries Believe me if the leader of your country is taking loans then he is not loyal to your country and your people. Fire him from the job or shoot him otherwise damage will not recover never. On the other hand if the leader of your country is bringing industries to your country he is loyal and patriot to your country. Respect him Salute him and of course hug him because he deserves it. And if a country is giving you loans then he is your enemy he will never be your friend never. And if a country is giving you industries then he wants to become your friend and he really wants to become your friend. I can be wrong and may be i have told very wrong things but this thing is always and will always be right no matter what. Just remember what i have said above and don t forget. Also one thing for sure and that is US EU and UK are the enemies of Pakistan and Muslim World that is because these western countries caused the collapse of Ottoman Empire which i don t forgot till this day. And i Strongly believe one day US EU and UK will collapse but that collapse will be the worst one can even imagine. That is slow but its penetration will be devastating for them and before that i want west to remember one thing and that is how they collapsed our beloved Ottoman Empire and it is just a matter of loyality and technology and then we will see. But for now we have to kill western puppets and corrupt people in our countries be it anyone i said anyone.
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