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China gives big relief to Pakistan by rescheduling $4.2 billion loans: Tarin

Pakistan has urged China to increase the size of the currency swap facility from $4.5 billion to $10 billion – an additional borrowing of $5.5 billion.

ISLAMABAD: Finance Minister Shaukat Tarin said that China has agreed to rollover $4.2 billion debt that Pakistan was supposed to pay this week, a strategy which will provide a major financial relief to Pakistan.

The $2 billion loan by China’s State Administration of Foreign Exchange (SAFE), has been rolled over as it was matured on Wednesday (March 23).

Finance Minister said that the visiting Chinese Foreign Minister also conveyed on Tuesday China’s willingness to reschedule another $2.2 billion Chinese commercial loans, which would mature for payment on Friday (March 25), according to Tribune.com

Pakistan had made repeated requests to Beijing to rollover the debt and the latest request was made last week to Chinese top leadership, according to the ministry officials.

The response of the Chinese embassy was awaited till the filing of the story. China has so far stood by its commitments and has been bailing out the country.

Beijing had given a commitment to the International Monetary Fund in 2019 to rollover it’s  debt until the Fund programme expires.

During the visit of Prime Minister Imran Khan Pakistan had sought $4 billion rollover of SAFE deposits loans that were maturing in the next few months.

Pakistan had requested a total  $21 billion lifeline that included a total $10.7 billion rollover of both commercial and safe deposits.

Dollar Background

These included rollover of SAFE deposits of $4 billion and commercial loans of $6.7 billion upon maturity.

Pakistan has only $15.8 billion foreign exchange reserves as of last week and its currency is fast depreciating. The rupee fell to the lowest ever level of Rs181.75 to a dollar in interbank on Tuesday.

Pakistan had also requested to increase the size of the currency swap facility from $4.5 billion to $10 billion – an additional borrowing of $5.5 billion.

China has not yet communicated its decision to Pakistan.

The Currency Swap Agreement is a Chinese trade finance facility that Pakistan has been using since 2011 to repay foreign debt and keep its gross foreign currency reserves at comfortable levels instead for trade-related purposes.

The benefit of this arrangement is that the additional Chinese loan will not reflect on the book of the federal government and will not be treated as part of Pakistan’s external public debt.

Pakistan had paid Rs26.1 billion interest on the outstanding balance at agreed rates.

Last month, the IMF said that Pakistan owes $18.4 billion or one-fifth of its external public debt to China, which is not only $4 billion higher than the officially reported figures but is also the highest lending by any single country or financial institution.

The IMF has made the $4 billion loan given by China to stabilise the foreign exchange reserves part of the external public debt as of June 2021. Out of this, $2 billion matured today but was extended further due to Pakistan’s thin financial position.

Also read Kashmiris all praise for Pakistan’s stance at OIC summit

The amount of $18.4 billion is equal to 20% of the external public debt reported by the IMF in its report. It is also the highest amount given by any country or an institution. The World Bank’s outstanding debt towards Pakistan was $18.4 billion by end of the last fiscal year.

The western countries and the international financial institutions have been closely watching Pakistan’s financial relations with China, particularly after the China-Pakistan Economic Corridor.

The money that now Pakistan needs to pay for foreign loans and the cost of imports is also shown at the higher end of $30.4 billion by the IMF in its latest report.

According to the IMF, Pakistan’s gross external financing requirements are estimated at $30 billion for the current fiscal year that will increase to $35 billion in the next fiscal year.

Javed Mahmood
Written By

I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.

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