Chinese authorities have extended Pakistan’s $2 billion loan in State Administration Foreign Exchange (SAFE) deposits for a year, according to The News.
Three SAFE deposits have been rolled over by China.” All three deposits were due on July 23, 2022, one $500 million on June 27, 2022, and one $1 billion on June 29, 2022, respectively. A top Finance Division official told The News that China’s SAFE deposits of $2 billion had been rolled over for another year.
With a total of $4.3 billion in loans from China, including $2.3 billion in commercial loans and now $2 billion in SAFE deposits, Islamabad is now able to meet its external funding needs for the current fiscal year with a stunning $35.9 billion in loans and deposits from the country.
By the end of this month, the International Monetary Fund has linked the prospect of conducting a provisional Executive Board meeting with acceptable finance assurances.
After the July 31 rise in the petroleum development fee, Pakistan completed previous steps for the combined seventh and eighth Extended Fund Facility assessments, according to IMF resident official Esther Perez Ruiz in Islamabad. Investors’ faith in a stable economy was bolstered as the rescue was restarted.
When it was confirmed that Saudi Arabia and the United Arab Emirates will make a loan of $4 billion to Pakistan following the IMF release of its tranche, it was tied to the conduct of an Executive Board meeting.
Saudi Arabia, Qatar, and the United Arab Emirates (UAE) have all confirmed to Pakistani authorities that they will help bridge a $4 billion funding gap identified by the International Monetary Fund (IMF) in order to meet Pakistan’s gross external financing requirements of $35.9 billion for the current fiscal year.
With deferred payments of $1.2 billion, Saudi Arabia may ratify the $2.4 billion jacking up of the oil facility.
One billion Special Drawing Rights (SDRs) might be converted into US dollars for Islamabad by Pakistan and the IMF. However, because it was only an option for which a mechanism had to be developed, the conversion of the SDRs facility may take some time.
Obtaining shares in state-owned firms (SOEs), particularly in the oil and gas industry, may pique UAE interest, but such transactions will take time to complete.
The idea of Qatari gas and RLNG on deferred payment is expected to come to fruition shortly since negotiations are ongoing. Even though the sale of RLNG power plants to a friendly country would take a while, the country stands to gain $2-$3 billion.
This has all happened at a time when the country’s foreign exchange reserves are being depleted rapidly. The State Bank of Pakistan’s foreign exchange reserves peaked in August 2021 at $20 billion but then plummeted to $8.5 billion on July 22, 2022.
The SBP’s reserves declined by $754 million to $8.5 billion in the week ending on 22-Jul-2022 due to external debt and other obligations.