By Staff Reporter
ISLAMABAD: Pakistan will get another $1.3 billion from all-weather ally China to shore up its fast-depleting forex reserves, Finance Minister Ishaq Dar said on Friday, days after the country received $700 million from Beijing.
China has increased its economic sway in Pakistan during the past year, providing more dollar in loans to help its neighbour stave off a currency crisis than the western lenders. The latest money, which will come in three phases, however, demonstrates the perilous fragility of Pakistan’s stocks of foreign currency, depleted in recent months by fall in exports and remittances from Pakistanis abroad.
The Industrial and Commercial Bank of China Ltd (ICBC) would provide the funding in the coming days.
Dar said the total $2 billion is in effect Pakistan borrowing back the debt repayments it has paid to Beijing for previously agreed loans.
“All our formalities with the ICBC are complete as of last night. We returned them $1.3bn in the last few months they are giving it back and have renewed this facility,” the minister told a news conference in Islamabad.
Dar said $500 million would be transferred to Pakistan possibly in the next few days – by Monday or Tuesday – and another $500 million within 10 days.
Last week, Pakistan received a much-needed cash injection of $700 million from China to help its ailing economy before the finalisation of talks with the IMF for financial assistance.
The minister said Pakistan will need $5 billion external financing to close its financing gap this fiscal year, which ends in June.
He expects more external financing will be coming to Pakistan after Islamabad signs a deal with International Monetary Fund (IMF), which the minister said should be done by next week.
The lender has been negotiating the deal with Pakistan since early last month to clear ninth review, which if approved by its board will issue over $1 billion tranche of $6.5 billion bailout agreed in 2019.
Dar also assured that the country would not default.
“We have never defaulted and we won’t now. Yes, we were in a precarious situation and are going through it currently,” he said. “I am confident that by June 30 we will take the State Bank’s reserves to $10 billion and national reserves near to $16 billion.”
Meanwhile, rupee on Friday strengthened 2.38 percent in interbank closing at 278.46 rupees against the dollar, a day after the central bank raised its policy interest rate by 300 basis points (bps) to 20 percent.
The rupee , which fell more than 6 percent on Thursday, was trading at 275.5 against the dollar during the day, up nearly 3.5 percent, after the opening session.
Analysts said the rupee may have appreciated over the governors statement in the analyst meeting where he says the IMF has not asked to match the border rate.
The value of the local currency has been depreciating amid delays in a funding deal with the IMF.
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