Pakistan received $700 million from the China Development Bank on Friday, and there is a slight increase in the State Bank of Pakistan’s (SBP) foreign exchange reserves.
“AlhamdoLilah! The State Bank of Pakistan has today received $700 million from the China Development Bank, “Minister of Finance Ishaq Dar said via Twitter.
China’s $700 million deposit will be a lifeline for the cash-strapped nation. Pakistan has been struggling to pay off its exceptionally high levels of external debt and has only enough dollars to fund imports for barely more than three weeks.
The coalition administration has been diligently striving to raise the SBP’s foreign exchange reserves, which stood at $3.25 trillion as of February 17. However, notwithstanding the delay in resuming the $6.15 billion International Monetary Fund (IMF) program, the government struggled with reserve accumulation.
After the China Development Bank’s board approved a $700 million credit facility for Pakistan, Dar announced earlier this week that all essential procedures had been fulfilled.
This week, the SBP is expected to receive the payments to bolster the nation’s diminishing foreign exchange reserves.
According to credible sources who spoke to The News on Wednesday, two commercial loans worth $500 million and $800 million are expected to be refinanced.
Pakistan will refinance up to $2 billion in Chinese loans by the end of February or the first week of March 2023.
Pakistan also wants to negotiate a staff-level agreement with the IMF this week. However, for the global lender to convene a board meeting and approve the $11 billion tranche, an extra 1.5 months would be required.
Pakistan has implemented rigorous fiscal austerity measures to get a $6.15 billion IMF bailout. However, according to experts, it seemed improbable that the country’s economy would recover even once the IMF program was reinstated.
Especially in the run-up to this year’s elections, the funding and sustained performance of the program is vulnerable to significant challenges. There is a growing likelihood of a debt readjustment around 2023–2024.
Pakistan’s external debt servicing requirement for the current fiscal year 2022–2023 is $23 billion; $6 billion has been repaid, $4 billion has been carried over, and $13 billion must be raised.
In addition, between FY24 and FY26, the nation owes $75 billion in further repayment commitments.
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