Yet another loan: On the verge of default, Pak gets $1 bn breather from China
Virendra Pandit
New Delhi: On the verge of default after June 30, and amid the bailout delays by the International Monetary Fund (IMF), Pakistan on Friday received a fresh loan of USD 1 billion from China, the media reported.
Of the USD 130 billion worth of external loans Pakistan has to pay to lenders, almost a third is from China alone. The broke South Asian country has to repay around USD 25 billion this year alone.
Islamabad’s battered economy is in unprecedented turmoil amid financial woes and the delay in an agreement with the IMF that could release much-needed funding crucial to avoid the risk of default.
The country’s central bank, the State Bank of Pakistan (SBP), in a brief message to the media on Friday night, said: “This is to inform you that USD 1 billion has been received from China.”
Commenting on the diminishing foreign reserves of the country, Finance Minister Ishaq Dar said that the SBP will receive USD 1.30 billion from China by Monday. And talks for a USD 2 billion swap with Beijing were also underway.
Pakistan is seeing no signs of securing external financing any time soon amid political instability. Even the IMF expressed dissatisfaction with Pakistan’s recently presented budget.
Islamabad has barely enough currency reserves to cover one month’s imports. It had hoped to have USD 1.1 billion of the funds released in November 2022, but the IMF has insisted on a number of conditions before it makes any more disbursements. In the FY24 budget of USD 76 billion outlay, Pakistan has earmarked nearly half of it for repayment of loans and also increased the defense budget by some 12 percent.
Finance Minister Dar did hold several sessions but has failed to convince the top IMF officials about the completion of the ninth review essential for securing a staff-level agreement for the release of the USD 1.1 billion tranche.
Only two weeks are left for Pakistan to reach a deal with IMF or face a Sri Lanka-type default that would seriously affect the economy. The bailout package will expire on June 30, the media said.
Pakistan’s IMF program expires this month, with over USD 2.5 billion in funding yet to be released as the country seeks to reach an agreement with the lender while dealing with record 38 percent inflation, fiscal imbalances, and low reserves.
