A Chinese bank has assured Pakistan that it will provide a new $500 million loan within days, bringing its commercial lending total to $1.7 billion of the $2 billion pledged, The News International reported.
Pakistani authorities are running from pillar to post to get 100 percent confirmation from friendly donor countries and multilateral creditors before concluding a staff-level deal with the International Monetary Fund (IMF). It was an unwritten condition of the IMF that Pakistan must secure commercial loan refinancing and a deposit rollover from China during the program period, which is expected to end in June 2023.
“There will be another $500 million commercial loan from a Chinese bank,” a top Pakistan finance official confirmed on Wednesday, adding that it would happen soon, The News International reported.
Chinese banks have already refinanced $1.2 billion in commercial loans in recent weeks, and now Beijing has pledged another $500 million in loan refinancing in the coming days.
It is pertinent to note that Pakistan had also requested to allow rollover on China’s $2 billion SAFE deposit within the current month.
All this, the refinancing of commercial loans and rollovers on SAFE deposits are a pre-requisite for the signing of a staff level agreement between the IMF and the Pakistani side.
Now the Pakistani authorities eagerly await confirmation from the Kingdom of Saudi Arabia, the UAE and Qatar, as well as the World Bank and the Asian Infrastructure Investment Bank (AIIB), to meet their USD 6 billion external financing needs by the end of June 2023, reported The News International.
The guarantees of securing external financing are crucial for the sustainability of the IMF program as it is quite difficult for the State Bank of Pakistan to boost its foreign exchange reserves to USD 8-10 billion by the end of June 2023. had estimated it at $16 billion by August 2022, in the wake of the completion of the seventh and eighth assessments under the $6.5 billion expanded fund facility.
It will be quite difficult for IMF staff to defend a 50 percent reduction in State Bank of Pakistan (SBP) foreign exchange reserves if there have been no shocks to Pakistan’s economy on the external front. But Pakistani authorities argued that the flash floods had affected many parts of Pakistan, causing a loss of $30 billion to the economy.
There is one piece of good news for Pakistan’s economy: Brent oil is down to USD 74.39 and West Texas Intermediate (WTI) is down to USD 68.16 per barrel on the international market.
Meanwhile, on Wednesday, the IMF secretly launched “Inclusive Growth in the Middle East/North Africa (MENA) Region” here at the National University of Sciences & Technology (NUST), which featured presentations by IMF high-ups who argued that state-owned enterprises (SOEs) had a large footprint anywhere, this resulted in the crowding out of the private sector.
Pakistan’s budget makers also assured the IMF that they would prepare gender-based budgeting in the next financial year.
At a time when the IMF dwells on its focus on inclusive growth in its published books, the federal government’s development budget, known as the Public Sector Development Program (PSDP), was virtually slashed by 50 per year under the IMF’s tight scrutiny. . cent for the current fiscal year consistent with the Fund’s requirement to limit the budget deficit target.
To meet the IMF’s demands, Consumer Price Index (CPI) and Sensitive Price Indicator (SPI)-based inflation have risen to unprecedented levels of 31.5 percent per month and 42.3 percent per week.
(Except for the headline, this story has not been edited by NDTV staff and is being published from a syndicated feed.)