ISLAMABAD: Prime Minister Shehbaz Sharif said that a Chinese bank had extended a $600 million loan to Pakistan. He said that it will provide a much-needed boost to the country’s foreign exchange reserves.
PM Shehbaz stated this on Tuesday at the launch of the Prime Minister’s Youth Sports Initiative in Islamabad. Shehbaz Sharif also pledged to allocate additional funds for youth development if re-elected.
Prime Minister highlighted that the recent assistance from friendly countries, including the rollover of the loan from the Exim Bank of China, has positively impacted Pakistan’s economic indicators.
However, he did not provide specific details regarding the timing of the loan repayment.
Pakistan has shown signs of economic stability following the approval of a $3 billion bailout program by the International Monetary Fund (IMF).
The first tranche of $1.2 billion has already been disbursed under a nine-month stand-by arrangement.
Furthermore, Pakistan received $1 billion from the United Arab Emirates and $2 billion from Saudi Arabia. It reflected the confidence of these countries in the agreement reached between Islamabad and the IMF in June.
As of July 7, Pakistan’s foreign exchange reserves held by the central bank slightly increased to $4.524 billion, with a $61 million rise, according to the State Bank of Pakistan.
The IMF’s projections indicate that the bailout program will prioritize a tight monetary policy to control inflationary pressures in the country, with an expected average inflation rate of 25.9% in fiscal year 2024.
To address the economic challenges, the Pakistani government has projected a 21% inflation rate for fiscal year 2024, while the current key policy rate stands at 22%.
The IMF statement emphasized the need for a continued tight and data-driven monetary policy going forward.
Pakistan’s economy has grappled with a severe balance of payments crisis, with limited central bank reserves that could cover just one month of controlled imports. The IMF projects that by fiscal year 2024, Pakistan will have an import cover of 1.4 months.
The IMF deal, reached after eight months of challenging negotiations on fiscal discipline, is considered a crucial lifeline for Pakistan, preventing it from defaulting.
The IMF emphasized the importance of a market-determined exchange rate in absorbing external shocks, reducing imbalances, and restoring growth, competitiveness, and buffers for Pakistan’s economy.
