- In total, China has rolled over $4.3bn in loans.
- It has provided $2.3bn in commercial loans and $2bn in SAFE deposits.
- IMF has linked its loan release with assurances from friendly states.
ISLAMABAD/KARACHI: China has rolled over a $2 billion loan in State Administration Foreign Exchange (SAFE) deposit for a year for cash-strapped Pakistan’s economy amid dwindling forex reserves, The News learnt Wednesday.
“China has rolled over three SAFE deposits. The first deposit of $500 million was due on June 27, 2022, the second $500 million matured on June 29, 2022, and the third $1 billion were due on July 23, 2022. China’s SAFE deposits of $2 billion have been rolled over for one year,” a top official of the Finance Division told The News.
So far in totality, China has rolled over a $4.3 billion loan, including $2.3 billion in commercial loans and now $2 billion in SAFE deposits, making it possible for Islamabad for bridging the external financing gap with a whopping amount of $35.9 billion for the current fiscal year.
The IMF has linked the possibility of holding a planned tentative Executive Board meeting by end of this month once adequate financing assurances are confirmed.
The IMF resident representative in Islamabad, Esther Perez Ruiz, said Pakistan had completed prior actions for the combined seventh and eighth reviews of the Extended Fund Facility, following the increase in petroleum development levy on July 31. This signalled a resumption of the bailout, boosting investor confidence in stabilising the economy.
However, the IMF linked the holding of its Executive Board meeting with the confirmation that Saudi Arabia and the United Arab Emirates would give an expected $4 billion loan to the country after the IMF releases its tranche.
Pakistani authorities have been awaiting confirmation from friendly countries, especially Saudi Arabia KSA, Qatar, and the UAE to bridge the financing gap of $4 billion identified by the IMF for materialising the gross external financing requirements of $35.9 billion for the current fiscal year.
Saudi Arabia might confirm jacking up the oil facility on deferred payments of $1.2 billion, making the total oil facility to the tune of $2.4 billion.
Pakistan and the IMF are also discussing the possibility of one billion Special Drawing Rights (SDRs) for conversion into US dollars for Islamabad. But this conversion of the SDRs facility might take some time because it was just an option for which the mechanism would have to be devised.
The UAE might show its interest in getting shares of state-owned enterprises (SOEs), especially in the oil and gas sector, but it will take a few months for materialising such commercial transactions.
The possibility of gas and RLNG on deferred payment from Qatar is likely to be materialised soon as discussions are underway on this subject. The selling out of RLNG power plants to one friendly country will also take some time, but it could fetch $2-$3 billion into the national kitty.
All these developments have occurred at a time when the foreign exchange reserves have depleted at an accelerated pace. The foreign exchange reserves held by the State Bank of Pakistan stood at $20 billion in August 2021, but it nosedived to $8.5 billion on July 22, 2022.
During the week ended on 22-Jul-2022, the SBP’s reserves decreased by $754 million to $8.5 billion due to external debt and other payments.