Inflows Unlocked: China’s $2.3bn lands in SBP coffers

By staff reporter

ISLAMABAD: State Bank of Pakistan (SBP) on Friday received a $2.3 billion Chinese loan, which analysts termed as godsend support, as the country’s foreign reserves were barely enough for 45 days of imports a day ago.

“I am pleased to announce that a Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into SBP account today, increasing our foreign exchange reserves,” Finance Minister Miftah Ismail confirmed on Twitter.

On Thursday, SBP’s dollar reserves fell by a whopping $748 million week-on-week, to an alarming level of $8.24 billion.

The SBP said total liquid foreign reserves held by the country stood at $14.21 billion as of June 17, 2022 with net foreign reserves held by commercial banks at $5.97 billion.

This credit breaks the ‘inflow drought’ the country has been facing since the suspension of the IMF loan programme.

Now other multilateral and bilateral lenders are likely to follow the Chinese suit as the financing channels have opened for Pakistan.
Pakistan had cleared a $2.3 billion commercial loan in March, hoping to reclaim it in April, but Beijing attached the caveat that the money could not be used mainly because of external account risks.
Reaching an agreement with the IMF and staying in it was also one of the Chinese demands conveyed to Pakistan.

However, Pakistan still needs the revival of a $6 billion IMF loan programme, which remains stalled since March.
Pakistan, which is now an inch away from the resumption of the agreement as it fulfilled all the IMF demands, will receive around $1 billion.

Pakistan struck the 39-month IMF loan deal in 2019, but could receive nearly half of it because of limited success with meeting the Fund goals.

The government on Friday slapped a one-year, 10 percent tax on large-scale industries to raise over 400 billion Pakistani rupees ($1.93 billion), in a bid to win $1 billion IMF tranche to shore up its economy.