China has determined to offer $2.5 billion in loans to Pakistan to boost administrator foreign exchange treasury that are not enough to provide wrap to still two months of imports in spite of receiving $4 billion loans from two Middle Eastern countries.
"Beijing will place the $2.5 billion in deposit with the central bank," a top government functionary told The Express Tribune. With the predictable $2.5 billion deposits, China's donation in this fiscal year alone would rush to $4.5 billion.
In July, China had also +deposits $2 billion with the State Bank of Pakistan. In the past five years, China has emerged as Pakistan's single largest savior.
The money is coming as part of the government's plan to protected inhalation space till the time its macroeconomic stabilization procedures take effect.
After coming into power, Prime Minister Imran Khan had visit China, Saudi Arabia, and the United Arab Emirates to position emergency loans to evade a looming non-payment.
Resultantly, Pakistan has tenable $14.5 billion worth of commitments from these three countries that have helped mostly bridge the external financing gap of the ongoing fiscal year.
Before impending into power, Khan was serious of captivating loans to run the country but due to the tremendously low level of foreign currency reserves and finance supplies reputation above $25 billion, the premier had to fly to Beijing and other capitals to seek loans.
Saudi Arabia has decided to provide a $6 billion financial help package, which included $3 billion in short terms loans at an interest rate of 3.18%.
The State Bank of Pakistan (SBP) Governor Tariq Bajwa on Thursday said the modalities for $3 billion oil on postponed payments were finalized this week and an agreement would be a sign on February 16 during the visit of Saudi Crown Prince Mohammad bin Salman. Riyadh has already disbursed $3 billion.
The UAE has decided to provide $3 billion in loans at an interest rate of around 3% and has already disbursed $1 billion. A $3.2 billion worth of oil facility on delayed reimbursement is being expected.
Pakistan has prearranged these deposits for a term of one to three years but these are likely to be rolled over, in case Islamabad faces difficulty to return them, said the sources in the Finance Ministry.
But regardless of $4 billion inflows from Riyadh and UAE during the past two months, the disgusting official foreign currency treasury stayed at only $8.12 billion as of December 25, according to the SBP governor.
The $8.12 billion treasury is enough to cover only seven weeks of imports and is below the minimum level that the International Monetary Fund and World Bank set down. Due to this, the World Bank and the Asian Development Bank are not as long as loans for budget financing.
Sources in the Finance Ministry said the instant concern for the government is to keep the country monetarily afloat till the time the macroeconomic stabilization measures start yielding positive results.
However, the SBP governor on Thursday said despite these measures the present account deficit remains high, standing at $8 billion in six months.
The overall foreign loans disbursement also remains low during the first half of the fiscal year, status at only $2.2 billion from July through December.
The government on Thursday also launches Diaspora bonds at interest rates of 6.25% for three years and 6.75% for five years to arrange funds for the balance of payments support.
Finance Minister Asad Umar said the other day that he also gave the go-ahead to launch two more financial instruments to meet external sector financing necessities. One gadget, likely to be Sukuk bond, could be launched before June, according to the Finance Ministry officials.
The source said the government is planning introduction foreign currency Sukuk to tap the Islamic markets. There is also a plan to launch $3 billion Eurobonds during the current fiscal year. Asad Umar had delayed it in November after the government agreed to loans from the three countries.
The Pakistan Tehreek-e-Insaf (PTI) administration blames expansionary fiscal policy of the last Pakistan Muslim League-Nawaz (PML-N) management for the overestimated swap rate and the current external sector problems. Since July, the rupee has been devalued by more than 15% but exports could not pick.
The sources said the Finance Ministry and the central bank are in the process of implement a supply exchange rate government while moving away from the managed exchange rate policy.
