ISLAMABAD: Pakistan said on Friday it had secured about $13 billion in additional financial support from two traditional friends – about $9 billion from China and more than $4 billion from Saudi Arabia – in addition to assurances from investments of approximately $20 billion.
Finance Minister Ishaq Dar told reporters that during Prime Minister Shehbaz Sharif’s recent visit to Beijing, Chinese leaders promised to refinance $4 billion in sovereign loans, refinance $3.3 billion in bank loans trading and to increase the currency swap by about 1.45 billion dollars – from 30 billion yuan to 40 billion. yuan. The total was $8.75 billion.
“They promised security of financial support,” Mr Dar said, citing Chinese President Xi Jinping telling Mr Sharif to “don’t worry, we won’t let you down”.
Dar said the Pakistani delegation had four major engagements, including a meeting with the Chinese president and prime minister, as well as the speaker of the National People’s Congress, the country’s legislative body.
These would be rolled over whenever they expired, the minister said, adding that around $200 million in commercial loans had already been disbursed a few days ago.
Responding to a question, Mr. Dar said that the Chinese side had also agreed to fast-track the processing of a $9.8 billion high-speed rail project (Main Line-1) from Karachi to Peshawar and that both sides would immediately trigger their respective teams.
Another official said the two sides hoped to hold a tender for the project by December and negotiations on funding terms could follow once a bidder is selected.
Dar said Karachi Circular Railway (KCR) and Hyderabad-Karachi Expressway projects have also been launched and KCR will soon be in the implementation phase. The minister said he had also suggested that part of the unpaid dues of Chinese power producers be converted into a global debt stock and that he had already cleared around 160 billion rupees in recent months.
Responding to a question, he said Saudi Arabia had also “given a positive response” to Pakistan’s request to increase its funding from another $3 billion to $6 billion and to double its deferred oil facility by $1.2 billion.
The two heads worked out $4.2 billion and the finance minister said there were no delays except about a month of processing time.
Dar said Saudi Arabia had also agreed to relaunch the $10-12 billion petrochemical refining project in Gwadar, for which he had been instructed by the prime minister to coordinate with respective ministries for finalization.
In addition to this, the minister said that Pakistan engages Saudi Arabia in privatization transactions such as LNG power projects and shares in other entities to secure non-debt-creating foreign inflows.
In addition, the minister said an additional $1.4 billion in inflows were nearing maturity, including $500 million from the Asian Infrastructure Investment Bank (AIIB) and two loans from the World Bank of $900 million as part of the national harmonization of the general sales tax.
He said he had a positive meeting with the Chief Minister of Sindh to harmonize the GST and the funding envelope could be settled amicably. He noted that GST harmonization was important for World Bank inflows to reach the country.
Regarding the exchange rate, the minister insisted that the real effective exchange rate (REER) of the rupee was around 194 rupees to the dollar, even lower than 200 rupees. He expected stakeholders to also keep the national interest in mind instead of “just outrageous profit”.
Pakistan had pledged with China and Saudi Arabia for financial support, including the renewal of maturing loans under arrangements for around $35 billion in debt and liability repayments during of the current fiscal year. The Minister parried a question relating to the extension of the repayments of the debt of the Chinese independent power producers (IPP).
As part of the International Monetary Fund’s 7th and 8th Quarterly Reviews, Pakistan and the IMF had estimated total external financing needs at around $33-34 billion, but this did not include damage requirements. flooding.
The minister said the management of the Beijing-based Asian Infrastructure Investment Bank (AIIB) welcomed Pakistan’s announcement not to seek Paris Club debt rescheduling, to ensure payments of international obligations as they fall due and complete the ongoing IMF program.
Last month, Mr Dar made it clear that Pakistan would instead seek to reschedule bilateral debt which currently stands at around $27bn to ensure more leeway in foreign loan repayments amid tightening external account conditions.
“Bilateral debt rescheduling is fine,” he said at the time, ruling out international debt rescheduling of wealthy Western countries under the Paris Club, multilateral and international sovereign bonds.
Speaking to reporters on Monday, the minister said there was no point in rescheduling the Paris club as the overall debt to these creditors was no more than 11% of total external debt and relief from debt over the year would be less than $1.2 billion.
Paris Club creditor countries typically include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Bas, Norway, Russia, Spain, Sweden, Switzerland, the United Kingdom and the United States, and together they owe Pakistan about $10.7 billion.
“When we’re going to arrange $32 billion to $34 billion for external payments, another $1.2 billion isn’t a big deal,” he said. These repayments involved external debt service of about $22 billion and a current account deficit of about $10-12 billion.
Foreign exchange reserves held by the State Bank of Pakistan reached $8.91 billion in the week ended October 28. The country’s total reserves now stand at $14.68 billion, including $5.77 billion held by commercial banks.
Posted in Dawn, November 5, 2022