Chinese banks have agreed to refinance Pakistan with USD 2.3 billion worth of funds in a massive relief for the cash-starved country to help it bolster its depleting foreign exchange reserves, the finance minister has said.
Miftah Ismail said on Thursday that the terms and conditions for refinancing have been agreed and the inflow is expected “shortly” after some routine approvals from both sides.
“Good News: The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about US$ 2.3 billion) have been agreed. Inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves,” the minister said in a tweet.
Pakistan is facing an uncertain economic situation due to a delay in the revival of a stalled multibillion-dollar International Monetary Fund (IMF) programme.
The development comes as a massive relief to economic policymakers that saw foreign exchange reserves held by the State Bank of Pakistan fall to USD 10.09 billion, with the level staying at less than 1.5 months of import cover, Geo News reported.
The agreement with Chinese banks is expected to bolster the reserves and enable the country to make import payments while lending some support to the rupee as well which has lost over 25 per cent since the start of the outgoing fiscal year 2021-22.
The restoration of Pakistan’s delayed IMF programme rests on the government’s capacity to make fiscal adjustments of about 2.5 per cent of the gross domestic product (GDP), or Rs 2,000 billion, by increasing revenues and reducing expenditures in the upcoming budget 2022-23.
The IMF’s wish-list or demands do not end here, as the government must end petrol subsidies of Rs 39 per litre and diesel subsidies of Rs 53 per litre, raise electricity tariffs by Rs 8 per unit via an increase in base tariff and fuel price adjustments, and increase gas tariffs by 20 per cent on average to demonstrate its commitment to implementing the much-needed ‘reforms agenda’ under the advice of the IMF programme, the report said.
Pakistan has faced growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.
Saudi Arabia has agreed to provide Pakistan with a “sizeable package” of around USD 8 billion to help the country revive its ailing economy. Saudi Arabia provided USD 3 billion deposits to the State Bank of Pakistan in December 2021 while the Saudi oil facility was operationalised from March 2022, providing Islamabad with USD 100 million to procure oil.
Saudi Arabia provided USD 3 billion deposits to the State Bank of Pakistan in December 2021 while the Saudi oil facility was operationalised from March 2022, providing Pakistan with USD 100 million to procure oil.