ISLAMABAD: According to The News on Thursday, a Chinese bank has promised Pakistan that it will give another refinance loan of $500 million soon, bringing the total amount of commercial loans to $1.7 billion out of the total agreed on amount of $2 billion.
Prior to negotiating a staff-level agreement with the International Monetary Fund, the Pakistani government is rushing from pillar to post to obtain 100% confirmation from favorable donor nations and multilateral creditors (IMF).
Pakistan was required to obtain the refinancing of commercial loans as well as a rollover on deposits from China during the programme duration, which is set to end in June 2023, as per an unwritten agreement with the IMF.
A senior member of the Finance Division revealed on Wednesday that “another $500 million commercial loan is coming from a Chinese bank” and promised that it will be completed soon.
Beijing has promised to re-finance another $500 million in loans in the coming days, adding to the $1.2 billion in commercial loans that Chinese banks have already refinanced in recent weeks.
It is important to note that Pakistan had also asked for permission to offer a rollover on the $2 billion Chinese SAFE deposit during the current month.
The refinancing of business loans and rollovers on SAFE deposits are all prerequisites before the IMF and Pakistani side can move towards finalizing a staff-level agreement.
Authorities in Pakistan are currently anxiously awaiting confirmation from Saudi Arabia, the United Arab Emirates, and Qatar, as well as from the World Bank and the Asian Infrastructure Investment Bank, regarding the fulfillment of the $6 billion in external financing requirements through June 30, 2023.
It is very difficult for the State Bank of Pakistan to increase its foreign exchange reserves up to $8–10 billion by the end of June 2023, even though the staff had projected them at $16–billion in August 2022, after finishing the seventh and eighth reviews under the $6.5 billion Extended Fund Facility. The guarantees for securing external financing are crucial for the sustainability of the IMF programme.
The IMF staff would find it challenging to justify a 50% fall in the foreign exchange reserves maintained by the SBP when there have been no external shocks to Pakistan’s economy.
Authorities in Pakistan countered those numerous areas of their country had been affected by flash floods, which had cost the economy $30 billion.
One piece of positive news for Pakistan’s economy is that Brent crude is now trading at $74.39 per barrel and WTI is now trading at $68.16.
In the meantime, the IMF launched “Inclusive growth in the MENA region” here at NUST on Wednesday. Presentations by IMF officials who argued that wherever state-owned enterprises (SOEs) had a significant footprint, it resulted in the crowding out of the private sector were included in the publication.
The IMF received assurances from Pakistan’s budget makers that they would create gender-based budgets for the following fiscal year.
The Public Sector Development Program (PSDP), the federal government’s development budget, was reduced by 50% for the current fiscal year in accordance with the Fund’s demand to reduce the budget deficit target, practically under the IMF’s strict scrutiny at a time when it is focusing on its focus on inclusive growth in its recently released books.
The CPI-based and SPI-based inflation rates have increased to historically high levels of 31.5% per month and 42.3% per week in order to satisfy the IMF’s demands.