![photo file photo file](https://i.tribune.com.pk/media/images/31662494972-0/31662494972-0.jpg)
Pakistan has got assurances of a $13 billion financial package from China and Saudi Arabia, including $5.7 billion in fresh loans, Finance Minister Ishaq Dar said on Friday in a statement that would help stabilise the reserves and the rupee.
The $13 billion package is equal to 38% of the estimated gross external financing requirements of Pakistan for fiscal year 2022-23.
Its materialisation can eliminate the threat of default, as the International Monetary Fund (IMF) has not come up with a big financial package despite imposing numerous harsh conditions.
Pakistan sought $7.3 billion debt rollover and a fresh loan of $1.5 billion from China, which the Chinese premier had assured to take care of, Dar told a group of journalists a day after his return from Beijing.
The cumulative loan that Pakistan has sought from China amounts to $8.8 billion.
Dar disclosed that he also requested his Saudi counterpart for a $4.2 billion in fresh loan. “The Saudi finance minister also gave “a positive nod”, he added.
The cumulative value of the Chinese and Saudi financial assistance would cover 38% of Pakistan’s estimated gross external financing requirements. The injection is expected to recoup the lost value of the rupee.
Dar said that the real inflation-adjusted value of the rupee was below Rs200 to a dollar, hoping to see a stronger value of the local currency without any injection.
To a question, the finance minister said that the IMF had not yet finalised the dates for the staff-level talks. However, he expected that the visit would take place this month.
The minister returned from Beijing from Shehbaz’s first visit to China as the prime minister. Shehbaz met with the Chinese President Xi Jinping and the premier Li Keqiang.
Read Dar faces uphill task to unlock $1b WB loans
Dar termed the visit highly successful, which helped revive the China-Pakistan Economic Corridor (CPEC). He said that during the meetings with the Chinese premier, he was requested to give a $1.5 billion new loan through the currency-swap arrangement.
“I requested China to increase the limit of the trade facility from 30 billion Yuan to 40 billion Yuan”, the minister said. The existing 30 billion worth facility is equal to $4.5 billion, which after the increase would jump to $6 billion.
In fiscal year 2021, Pakistan paid over Rs26 billion in interest cost to China for using a $4.5 billion Chinese trade finance facility to repay maturing debt, according to the State Bank of Pakistan.
Pakistan largely utilised the Chinese trade finance facility to repay foreign debt and keep its gross foreign currency reserves at comfortable levels. The $4.5 billion facility is part of the SBP’s current $8.9 billion in gross official foreign exchange reserves.
China has also extended $4 billion worth of SAFE deposits, which are also part of the $8.9 billion reserves. By excluding these loans, the central bank’s foreign exchange reserves remain just $400 million.
The trade facility, originally meant to promote bilateral trade in respective local currencies, has been used for paying the foreign debt.
The benefit of this arrangement was that the additional $1.5 billion Chinese loan would not reflect on the books of the federal government and it would not be treated as part of Pakistan’s external public debt.
Dar stated that Pakistan also requested China to roll over its $7.3 billion debt that was maturing in the next eight months, as part of its overall plan to arrange $34 billion in the current fiscal year.
Read more Forex reserves rise to $8.9b
“The $3.3 billion Chinese commercial loans and $4 billion worth SAFE deposits loans were maturing from now till June next year and we have sought rollover,” said Dar.
The government sought the rollover of the $4 billion SAFE deposit for more than one year.
Sources told The Express Tribune that President Xi stated during the meeting with Shehbaz that China would honour all commitments that it gave to the IMF on behalf of Pakistan.
At the start of the IMF programme, China, Saudi Arabia and the United Arab Emirates (UAE) had assured the IMF to maintain their financial exposure in Pakistan. Dar also said that the Bank of China refinanced this week the $200 million loan matured in the past.
When asked about clearing outstanding Chinese dues on account of payments to the Chinese Independent Power Producers (IPPs) for the cost of the electricity purchase, Dar said that he has proposed that the previous obligations should be treated as debt stock and that Pakistan would clear all the future liabilities.
Dar said that during his visit to Saudi Arabia last week, he requested doubling the existing $3 billion Saudi cash deposit to $6 billion –implying a $3 billion fresh loan.
The minister said that he also sought the doubling of the oil financing facility to $2.4 billion. Cumulatively, the Saudi financial assistance will amount to $4.2 billion.
Saudi Arabia has in the past provided $4.2 billion worth of financial packages to Pakistan. This included $3 billion in cash assistance and $1.2 billion worth of annual oil and gas supply on deferred payments. The kingdom has already announced to extend the $3 billion repayment period by one year.
COMMENTS (4)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ