China again comes to Pakistan’s aid, agrees to refinance loans worth $2.3 billion
Despite asking Pakistan to contact the International Monetary Fund (IMF) last month to finance loans, China has once again come to the rescue of its cash-strapped neighbor by agreeing to refinance 2, $3 billion in funds.
Pakistani Finance Minister Miftah Ismail said the funds “will shore up Pakistan’s foreign exchange reserves”.
“The terms and conditions for the refinancing of a 15 billion RMB deposit by Chinese banks (approximately $2.3 billion) have been agreed. The inflow is expected shortly after some routine approvals from both sides. This will help strengthen our foreign exchange reserves,” Ismail tweeted on Thursday.
The development comes as the State Bank Of Pakistan reports that the country’s foreign exchange reserves are under severe pressure and fell by $190 million to $10.308 billion in the first week of May.
Islamabad depends on foreign loans but they are not easily accessible.
Data from Pakistan’s Economic Affairs Ministry shows the country on the brink of economic crisis received just $248m in foreign loans in April, including $100m of oil on deferred payments from Saudi Arabia, reported the PTI news agency.
Pakistan is urging the IMF to reinstate an agreed $6 billion package in 2019.
The IMF gave half the money and asked the government introduced by new Prime Minister Shehbaz Sharif to ban imports of luxury goods and Pakistan’s central bank raised borrowing costs so it could deal with the rest of the package.
Outgoing Prime Minister Imran Khan blocked the package when he cut and froze fuel prices.
Earlier, China and Saudi Arabia denied providing economic aid to Pakistan and urged them to meet with the IMF first.
“We went to Saudi Arabia, Dubai and talked to other countries – they are ready to give money, but all say we have to go to the IMF first,” Ismail said last month. , citing that even China’s Asian Infrastructure Investment Bank has denied them loans.
If Pakistan and China resolve their dispute, another $1 billion loan tranche from the IMF will be immediately cleared.
Pakistan needs $15 billion to close the trade deficit and is expected to pay $20-21 billion in the next fiscal year from July due to the money it has borrowed.
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