Islamabad: Finance Minister Ishaq Dar said in a statement on Friday that Pakistan has received assurances from China and Saudi Arabia for a $13 billion financial package, including fresh loans of $5.7 billion.
The $13 billion package is equivalent to 38 percent of Pakistan’s projected gross external financing requirements for fiscal year 2022-23.
Implementing this could eliminate the risk of default, as the International Monetary Fund (IMF) has not come up with a major financial package despite imposing several stringent conditions.
Dar told a group of reporters a day after his return from Beijing that Pakistan had demanded a loan of $7.3 billion from China and a new loan of $1.5 billion, which the Chinese premier had assured to handle.
Pakistan sought a total loan of 8.8 billion dollars from China.
Dar revealed that he also requested a new loan of $4.2 billion from his Saudi counterpart. “The Saudi finance minister also gave a “positive approval,” he added.
The combined value of Chinese and Saudi financial assistance will cover 38 percent of Pakistan’s estimated total external financing needs. This injection is expected to regain the lost value of the rupee.
The real inflation-adjusted value of the rupee was below Rs 200 to the dollar, Dar said, adding that the local currency is expected to strengthen further without any injection.
In response to a question, the Finance Minister said that the IMF has not yet finalized the dates for the staff-level talks. However, he expected the visit to take place this month.
Shahbaz returned from Beijing on his first visit to China as Prime Minister. Shahbaz Sharif met Chinese President Xi Jinping and Prime Minister Li Keqiang.
Dar termed the visit highly successful, which helped revive the China Pakistan Economic Corridor (CPEC). He said that during meetings with the Chinese Prime Minister, he was requested to provide a new loan of $1.5 billion through a currency swap arrangement.
The minister said that I have requested China to increase the trade facilitation limit from 30 billion yuan to 40 billion yuan. The current $30 billion facility is equivalent to $4.5 billion, which will rise to $6 billion after the addition.
According to the State Bank of Pakistan, in fiscal year 2021, Pakistan paid an interest cost of over Rs 26 billion to China for using a $4.5 billion Chinese trade finance facility.
Pakistan has largely used the Chinese trade finance facility to service foreign debts and maintain its overall foreign exchange reserves at a comfortable level. The $4.5 billion facility is part of State Bank’s existing $8.9 billion gross government foreign exchange reserves.
China has also increased reserves worth $4 billion, which are part of $8.9 billion in reserves. Excluding these loans, the central bank’s foreign exchange reserves are down to just $400 million.
The trade facility, originally meant to promote bilateral trade in the respective local currencies, has been used to service foreign debt.
The advantage of this arrangement was that the additional $1.5 billion Chinese loan would not be on the federal government’s books and would not be considered part of Pakistan’s external public debt.
Dar said Pakistan has also requested China to repay its $7.3 billion loan, which is maturing in the next eight months, under its overall plan to arrange $34 billion in the current fiscal year.
“$3.3 billion of Chinese trade loans and $4 billion worth of safe deposit loans were maturing between now and June next year and we have attempted a rollover,” Dar said.
The government called for a rollover of $4 billion in safe deposits for more than a year.
Sources told JEE News that President Xi, during his meeting with Shahbaz, said that China would fulfill all the commitments it had made on behalf of Pakistan to the IMF.
At the start of the IMF program, China, Saudi Arabia and the United Arab Emirates (UAE) assured the IMF of maintaining their financial exposure to Pakistan. Dar also said that Bank of China had past-matured a $200 million loan this week.
When asked about clearing outstanding Chinese liabilities on power purchase cost payments to Chinese Independent Power Producers (IPPs), Dar said he has suggested that past liabilities should be written off as loans. should be treated as a deposit and that Pakistan will clear all dues. FUTURE LIABILITIES
During a visit to Saudi Arabia last week, Dar said, he had requested to double Saudi cash deposits from the current $3 billion to $6 billion.
The minister said he also called for doubling the oil financing facility to $2.4 billion. The total amount of Saudi financial assistance will be 4.2 billion dollars.
Saudi Arabia has provided financial packages worth $4.2 billion to Pakistan in the past. It included $3 billion in cash aid and $1.2 billion in annual oil and gas supplies on deferred payments. The kingdom has already announced a one-year extension of the $3 billion repayment period.
