Ishaq Dar, the finance minister of Pakistan, announced on Friday that China had extended a $2 billion loan that was due to mature last week. This decision has eased Pakistan’s severe balance of payment problem.
For Pakistan, where reserves have fallen to just four weeks’ worth of imports and negotiations over a $1.1 billion rescue tranche from the International Monetary Fund have stalled, locking in a rollover was crucial.
“I am happy to confirm that this had been rolled over on March 23,” Dar averred in the parliament, referring to the final maturity date. He added that the associated documentation had been duly met.
Requests for comments on the rollover were not answered by the Beijing administration or the Chinese central bank.
After the loan reached its maturity, Dar’s remarks served as the first formal notification of the rollover. Dar omitted to mention the arrangement’s other conditions or the new maturity date.
A senior member of the finance ministry said to Reuters on Wednesday that the restructuring would be formally confirmed after the procedure was finished.
Assuring external funding to support Pakistan’s balance of payments is one of the IMF’s requirements for the release of the next tranche. With a refinancing of $1.8 billion credited last month to Pakistan’s central bank, longtime friend Beijing has so far been Islamabad’s only source of assistance. The government’s Finance Division stated that Pakistan was presently experiencing an external liquidity shortage in its monthly Economic Update and Outlook.
“Through demand management policies, the government is trying to limit the current account deficit, which will not transfer further pressure on dwindling reserves,” mentioned the report. It also stated that inflation, which is already above 30% and is close to a 50-year peak, is anticipated to remain high.
The report listed factors leading to inflation like exchange rate depreciation, relative demand and supply gaps for basic commodities, and surge in fuel costs.
