Thursday, March 16, 2023
ISLAMABAD: A Chinese bank has assured Pakistan it will provide another refinanced $500 million loan within the next few days, bringing the total of commercial loans up to $1.7 billion out of the total committed amount of $2 billion, The News reported Thursday.
The Pakistani authorities are running from pillar to post to get 100% confirmation from friendly donor countries and multilateral creditors before moving toward striking a staff-level agreement with the International Monetary Fund (IMF).
It was the unwritten condition of the IMF that Pakistan must secure the refinancing of commercial loans as well as a rollover on deposits from China during the programme period, which is scheduled to expire in June 2023.
“Another $500 million commercial loan is coming from a Chinese bank,” a top official of the Finance Division confirmed on Wednesday and added that it would be done soon.
Chinese banks have already provided re-financing of $1.2 billion in commercial loans in the past few weeks, and now Beijing has given an assurance on another $500 million in loan re-financing in the next few days.
It is relevant to mention that Pakistan had also requested to grant rollover on the Chinese SAFE deposit of $2 billion within the ongoing month.
All these — the refinancing of commercial loans and rollovers on SAFE deposits — are pre-requisite for moving towards the signing of a staff-level agreement between the IMF and Pakistani side.
Now, Pakistani authorities are anxiously waiting for confirmation from Saudi Arabia, UAE, and Qatar, as well as from the World Bank and the Asian Infrastructure Investment Bank, for fulfilling the external financing needs of $6 billion until the end of June 2023.
The guarantees for securing external financing are crucial for the sustainability of the IMF programme, as it is quite hard for the State Bank of Pakistan to jack up its foreign exchange reserves up to $8–10 billion by the end of June 2023, though the staff had projected them at $16 billion in August 2022, in the aftermath of completing the seventh and eight reviews under the $6.5 billion Extended Fund Facility.
It will be quite difficult for the IMF staff to defend a 50% reduction in the foreign exchange reserves held by the SBP when there have been no shocks to the economy of Pakistan on the external front.
But Pakistani authorities argued that the flash floods had struck many parts of Pakistan, causing $30 billion in losses to the economy.
There is one good news for Pakistan’s economy: Brent crude is down at $74.39 and WTI is down at $68.16 per barrel in the international market.
Meanwhile, the IMF secretly launched “Inclusive growth in the MENA region” here at NUST on Wednesday, in which presentations made by the IMF high-ups who argued that wherever state-owned enterprises (SOEs) possessed a major footprint, it resulted in the crowding out of the private sector.
Pakistan’s budget makers also assured the IMF that they would be preparing gender-based budgeting in the next financial year.
At a time when the IMF is dwelling on its focus on inclusive growth in its launched books, practically under the IMF’s tight scrutiny, the development budget of the federal government, known as the Public Sector Development Program (PSDP), was slashed by 50% for the current fiscal year in line with the Fund’s demand to curtail the budget deficit target.
To fulfil the IMF’s demands, the CPI-based and SPI-based inflations have gone up to unprecedented levels of 31.5% every month, 42.3% every week.