Islamabad:
Pakistan and China have signed $ 3.7 billion equivalent commercial loan agreements this week, withdrawing the currency reserves back to double digits from the critically low level of $ 8.9 billion last week.
The offers will also help meet a commitment with the International Monetary Fund to close the 2024-25 financial year with $ 14 billion gross foreign exchange reserves.
Official sources told The Express Pakinomist that Industrial and Commercial Bank of China (ICBC) and Bank of China have signed a total of $ 1.6 billion on Friday. The money is paid out before Monday, which is the last day of the current financial year.
At one point, it seemed that China may not sign offers of $ 1.6 billion this week, resulting in hectic economic diplomacy. The sources said Deputy Prime Minister Ishaq Dar played a critical role in the completion of the offers after he was contacted by the Ministry of Finance.
DAR first began pursuing the Chinese authorities on May 19, eventually led to the signing and payment of $ 2.1 billion commercial loan from a syndicate of three Chinese business banks this week.
A $ 2.1 billion or 15 billion RMB Syndicon Financing Loans of Three Chinese Business Banks Matured a few days ago, dragging the reserves down to $ 8.9 billion, the sources said. Unlike rolling of Chinese cash deposits of $ 4 billion, the Chinese commercial loans must first be repaid before they are refinanced on new terms and conditions.
China has given this money of $ 2.1 billion in RMB currency, which is also reflected in the currency reserves of the central bank. As a result, the currency reserves jumped to $ 12.4 billion on Friday, the sources said.
China Development Bank has given 9 billion RMB, Bank of China 3 billion RMB and ICBC 3 billion RMB. The loan is extended for a period of three years, the government sources said.
There were still $ 1.6 billion pending amounts sliding for the next financial year. Ishaq Dar received confirmation from the Chinese authorities on Friday that the remaining two commercial loans have also been completed and the money is paid out very soon, the sources added.
In total, Pakistan and China have completed $ 3.7 billion worth of commercial loan agreements in the last few days. The Friday Agreement included a $ 1.3 billion loan in the industrial and commercial bank of China (ICBC). The ICBC had given the loan two years ago to liquid interest rates that translated at around 7.5%.
Bank of China’s $ 300 million loan was also completed and paid out in Chinese currency. The move to demolish loans from the US dollar is not Pakistan -specific, it is part of the overall Chinese policy to decouple its economy from the US currency.
Pakistan remains dependent on Beijing to remain fluid, the friendly nation constantly rolling over the $ 4 billion cash deposits, $ 5.4 billion for commercial loans and $ 4.3 billion trade funding facility.
The ADB-backed $ 1 billion foreign non-Chinese commercial loans was also paid out last week.
During the week ended on June 20, the SBP reserve fell by $ 2.7 billion to $ 9.1 billion due to external repayments, mainly repayment of commercial borrowing, according to a statement that the central bank issued Friday. During the current week, SBP received commercial loans equivalent to $ 3.1 billion and multilateral loans of over $ 500 million, it added.
The currency reserves that slip to less than $ 9 billion mark emphasize the vulnerability of the fragile external sector stability. Heavy dependence on foreign loans should also be a matter of concern for the government.
Rupee-dollar parity has again begun to come under pressure after the central bank went on a heavy purchase tip, the sources said. There was also a lack of foreign currency on the market, which led to the depreciation of rupe and compelling business banks not to open credits for imports.
Finance Minister Muhammad Aurangzeb has said the currency reserves would close over $ 14 billion at the end of this financial year.
Islamabad has also sought the re -planning of the government’s concession loans, preferential buyer credit and the buyer’s credit from export imports (Exim) Bank of China. China has not agreed to re -plan the buyer’s credit loan, they added.
China has shown a willingness to re -plan $ 1.8 billion worth of government concession loans and the preferred buyer credit by next month. These loans have been taken to various projects and are in addition to the commercial funding given by Chinese banks to Pakistan.
