Islamabad:
Pakistan again asked China to reprogram a debt of $ 3.4 billion for two years to fill a foreign financing gap identified by the International Monetary Fund – in a successful decision will largely respond to external financing concerns before before The next program reviews of the program.
Vice-Prime Minister Ishaq Dar made the official request during this week’s visit to Beijing, according to government sources. They said that the Chinese authorities were positive and hopefully, Beijing would accept the demand for evil of the external financing problems of Pakistan.
Pakistan asked the Export-Importation Bank (IDE) to consider rearrangement of its loans due from October 2024 to September 2027, representatives of the government said. They said Pakistan was required to identify funding sources to fill the external financing gap of $ 5 billion for the three -year program.
This is the second time that Pakistan has made a request to China in the last five months of reprogramming the debt of $ 3.4 billion provided by its Bank Exim. Earlier, in September of last year, the Minister of Finance wrote to Exim Bank and asked for the postponement.
According to a joint declaration from China-Pakistan published Thursday, the Pakistani party reiterated its great appreciation for the precious support of China for the budgetary and financial stability of Pakistan. The declaration was published at the end of the visit of the state of President Asif Ali Zardari in Beijing.
The debt of $ 3.4 billion was maturing between October 2024 and September 2027 – which coincided with the three -year IMF program. The bank has granted two types of loans – direct loans and guaranteed loans to public enterprises, sources said.
Reprogramming would be essential for Pakistan and it is part of the overall external external financing plan of $ 5 billion that Pakistan must implement to fill the gap, identified by the IMF at the time of the signature of the bailout package in September from last year.
Pakistan has requested an extension of two years in the reimbursement of the official debt and warranty obtained from the Chinese Export-Import Bank (Exim). The country would continue to make payments of interest.
From October 2024 to September 2025, the REPROID’s direct loans of $ 505 million in the government would mature – the period which will cover the first two journals of the IMF program. Then, from October 2025 to September 2027, $ 1.7 billion in direct government loans would mature. This leads to a total direct loan which requires an extension of two years to $ 2.2 billion.
The $ 1.2 billion loans from China to public enterprises also matured from October 2024 to September 2027 and the majority of them ripen from October this year.
In July 2023, the Minister of Finance of the time and now the Dar-Prime Minister ISHAQ DAR announced the $ 2.43 billion worth 31 loans postponed by China for two years. Dar had declared that the Chinese Bank Exim had overturned for two years of the main amounts of loans totaling $ 2.4 billion, which were due from July 2023 to June 2025. Pakistan was only paying interest on the debt reproduced from $ 2.4 billion.
In the event that Pakistan does not reimburse debt of $ 3.4 billion, its external financing lake reduces the same amount. This week’s government has also obtained a Saudi oil facility of $ 1.2 billion and contracted a loan of $ 300 million through the United Bank Limited to fill the overall financing gap.
The Pakistani authorities have already held at least a few meetings on the issue of debt restructuring of $ 3.4 billion and exchanged data with the Bank Exim.
Pakistan’s first official examination of the $ 7 billion program is expected to start in the first week of March and its successful conclusion will open the way to the publication of the next loan tranche of more than a billion dollars.
Pakistan depends strongly on Beijing to stay afloat, the friendly nation that constantly exceeds cash deposits of $ 4 billion, $ 6.5 billion for commercial loans and $ 4.3 billion in commercial funding.
Fitch Ratings, one of the three world credit rating agencies, said on Friday that the guarantee of sufficient external funding remains a challenge for Pakistan, given the existing exhibitions for major deadlines and lenders.
He added that Pakistan had budgeted by around $ 6 billion in multilateral funding, including the IMF, for this exercise, but around $ 4 billion will effectively refinance existing debt.
The demand of $ 3.4 billion is added to a new $ 1.4 billion loan that Finance Minister Muhammad Aurangzeb asked during his interaction with the Chinese Minister of Vice-Finance in Washington.
Aurangzeb had asked China to increase the limits under the currency exchange agreement to 40 billion CNY. Pakistan has already used the existing 30 billion CNY, or 4.3 billion dollars, a Chinese commercial facility to repay its debts and now seeks to increase this limit by 10 billion additional CNY, resulting in 1.4 billion Dollars at the current exchange rate.
It is not clear if China has entertained the new demand of $ 1.4 billion or not.
Fitch said Pakistan has continued to advance economic stability and rebuild external buffers. But progress on difficult structural reforms will be the key to the next IMF program exams and continuous financing of other multilateral and bilateral lenders.
He predicted that foreign reserves should surpass the objectives as part of the IMF program and previous fitch forecasts.
But exchange reserves remain low compared to financing needs. More than $ 22 billion in public external debt matures during this exercise, including almost $ 13 billion in bilateral deposits, said Fitch. He believed that bilateral partners will go, according to their promises to the IMF. Saudi Arabia has already exceeded $ 3 billion in December and the UAEs at $ 2 billion in January.
