Islamabad:
Pakistan has paid a Chinese commercial loan of $ 1 billion for the understanding that it would be refinant soon, which temporarily withdrew the thin reserves of foreign exchange of the nation to a minimum of six months of $ 10.6 billion.
The government returned the loan of $ 1 billion from the Industrial and Commercial Bank of China (ICBC) in two sections the same this month, said Pakistani authorities. The ICBC had granted the loan two years ago at floating interest rates, which translated around 7.5%.
The sources said another loan section of $ 300 million for the ICBC will mature in the middle of next month. The government will also withdraw the $ 300 million in April, they added.
Due to the reimbursement of the second section of $ 500 million in the third week of March, the reserves of the Central Bank fell to $ 10.6 billion. This demolished the gross official foreign exchange reserves at the lowest level of six months.
The first section of $ 500 million had been paid in the first week of March and the Central Bank covered the gap buying dollars from the market and the back of some foreign tickets.
The governor of the Central Bank said that his institution bought $ 9 billion in the market to build currency reserves in 2024. Without these purchases, the reserves would have been only $ 2 billion despite the international program of the Monetary Fund.
The Ministry of Finance was hope that the ICBC refinance the installation. They said that discussions have already begun, but they have not yet reached the point of determining the interest rate.
Pakistan depends largely on Beijing to remain afloat, the friendly nation that constantly passes on cash deposits of $ 4 billion, $ 6.5 billion worth commercial loans and a commercial financing installation of $ 4.3 billion.
The $ 2.7 billion more of Chinese commercial loans are maturing from April to June of this year. A union financing loan of $ 2.1 billion for three Chinese commercial banks is maturing in June. Separately, the $ 300 million laon of the China Bank will also mature in the same month, which Pakistan must be refinanced to retain reservations at their minimum critical levels.
The country still depends largely on fresh foreign loans and the reinvestment and refinancing of the existing debt to avoid a race in their reserves. Unlike the past, this time the IMF program has not helped obtain great foreign financing.
Pakistan and the IMF have reached an agreement at the personnel level on the completion of the first review of the installation of extended funds this week. The approval of the Board of the Agreement will lead to the release of the $ 1 billion section.
However, the moment of the IMF Board meeting is still uncertain due to exogeneous and indigenous reasons. The Board can occupy the case of Pakistan, either in May or June. There is a desire to conclude the first review and disburse the section before the end of June.
In the event that the IMF Board meeting slips to June, IMF staff can first review and support the 2025-26 fiscal year budget.
There are many areas that remain open for discussions, particularly the taxes of the real estate sector, drinks and tobacco. The IMF is not inclined to reduce transactions taxes in the properties as part of its well to change the investment of speculative sectors to the productive of the economy.
Pakistan had also requested China last month to reprogram a debt of $ 3.4 billion for two years to close a foreign financing gap identified by the IMF. The request had been made to the China Export Export Bank to consider the reorganization of its loans that expire from October 2024 to September 2027.
The Ministry of Finance has not yet officially revealed the status of the application. Pakistan is required to identify financing sources to fill the external financing gap of $ 5 billion for the three -year period of the IMF program.
During recent review conversations, the IMF agreed that the external sector has stabilized, but at the same time said that vulnerabilities remain that they can be addressed by combining adjusted fiscal and monetary policies and exchange rate flexibility.
The parity of Rupee-Dollar has remained largely stable in this fiscal year, although some depreciation in recent days. The Rupee-Dollar parity closed at RS280.2 to a dollar on Thursday.
