A Chinese bank has assured Pakistan that it will provide another refinanced USD 500 million loan within the next few days, bringing the total of commercial loans up to USD 1.7 billion out of the total committed amount of USD 2 billion, The News International reported.
The Pakistani authorities are running from pillar to post to get 100 per cent confirmation from friendly donor countries and multilateral creditors before moving toward striking a staff-level agreement with the International Monetary Fund (IMF). It was an unwritten condition from 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 USD 500 million commercial loan is coming from a Chinese bank,” a top official of the Pakistan Finance Division confirmed on Wednesday and added that it would be done soon, The News International reported.
Chinese banks have already provided re-financing of USD 1.2 billion in commercial loans in the past few weeks, and now Beijing has given an assurance on another USD 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 USD 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 the Kingdom of Saudi Arabia, the UAE, and Qatar, as well as from the World Bank and the Asian Infrastructure Investment Bank (AIIB), for fulfilling their external financing needs of USD 6 billion until the end of June 2023, The News International reported.
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 to USD 8-10 billion by the end of June 2023. Though the staff had projected them at USD 16 billion in August 2022, in the aftermath of completing the seventh and eighth reviews under the USD 6.5 billion Extended Fund Facility.
It will be quite difficult for the IMF staff to defend a 50 per cent reduction in the foreign exchange reserves held by the State Bank of Pakistan (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 USD 30 billion in losses to the economy.
There is one good news for Pakistan’s economy: Brent crude is down at USD 74.39 and West Texas Intermediate (WTI) is down at USD 68.16 per barrel in the international market.
Meanwhile, the IMF secretly launched “Inclusive growth in the Middle East/North Africa (MENA) region” here at the National University of Sciences & Technology (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 per cent 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 consumer price index (CPI) -based and Sensitive Price Indicator (SPI)- based inflation has gone up to unprecedented levels of 31.5 per cent every month, and 42.3 per cent every week.