By Staff Reporter
KARACHI: Pakistan received $1 billion from China on Friday as a refinancing of a loan that it paid off earlier this week, easing the country’s debt burden as it faces a looming expiry of an IMF bailout programme.
“$1 billion has been received from China,” the State Bank of Pakistan confirmed via a text message.
Pakistan paid back $1 billion to China on Monday and another $300 million on Friday.
The country expects to get another $1 billion by June 30 as the country is pinning hopes that China will continue to ease its payments pressure by extending loans as concerns rise about the nation becoming the next emerging market to default.
China has extended loans annually to Pakistan for many years. The government expects debt of $2.3 billion to be rolled over in June after Chinese banks extended another $2 billion in March.
Pakistan is facing a serious foreign exchange crisis, with foreign inflows insufficient to meet the country’s external debt servicing requirements.
The country has been making efforts to secure the next tranche of the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) program, but the ninth loan tranche is still pending, as the IMF has asked Pakistan to arrange $6 billion in financing for the release of IMF funds.
Pakistan had arranged $4 billion in financing before the release of China’s $1 billion inflows on Friday, bringing the total arrangement to $5 billion. Minister for Finance Ishaq Dar is confident that a staff-level agreement on the ninth review with the IMF will be materialized before the expiry of the programme in end June.
Cumulatively, Pakistan’s financing requirements for the next fiscal year (FY24) are $33 billion, including $10 billion of current account deficit and $23 billion of external debt. Despite a lower current account deficit, the country’s foreign exchange reserves are gradually depleting due to massive external debt payments and lower foreign inflows.
The fresh inflow from China boosted Pakistan’s foreign exchange reserves, which had dropped below $3 billion after the loan repayment on Monday. In the week ending June 9, Pakistan’s central bank’s foreign exchange reserves rose by $107 million to $4.0 billion. However, with the receiving of fresh inflows, the reserves held by the SBP have increased to $5 billion.
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