Despite asking Pakistan to reach out to the International Monetary Fund (IMF) last month for financing loansChina once again came to its cash-strapped neighbor’s rescue as it agreed to refinance $2.3 billion worth of funds.
Pakistan finance minister Miftah Ismail said that these funds will ‘shore up Pakistan’s foreign exchange reserves’.
“The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about $2.3 billion) have been agreed. Inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves,” Ismail tweeted on Thursday.
The development comes amid the State Bank Of Pakistan reporting that the nation’s forex reserves are under severe stress and fell by $190 million to $10.308 billion in the first week of May.
Islamabad relies on foreign loans but they are not easily accessible.
Pakistan’s ministry of economic affairs data shows that the nation on the verge of the economic crisis received only $248 million in foreign loans in April, including $100 million worth of oil on deferred payments from Saudi Arabia, news agency PTI reported.
Pakistan is urging the IMF to restore a $6 billion package agreed upon in 2019.
IMF has given half the money and has asked the government ushered in by newly chosen prime minister Shehbaz Sharif to ban luxury imports and the Pakistan central bank increased borrowing costs so that it can process the rest of the package.
Outgoing prime minister Imran Khan blocked the package when he reduced and froze fuel prices.
Earlier, China and Saudi Arabia denied granting Pakistan economic relief and urged them to meet the IMF first.
“We went to Saudi Arabia, Dubai and spoke to other countries — they are ready to give money, but all of them say we need to go to the IMF first,” Ismail said last month, citing that even the Chinese Asian Infrastructure Investment Bank denied them loans.
If Pakistan and China sort out their difference then another $1 billion loan tranche from the IMF will be cleared immediately.
Pakistan needs $15 billion to meet the trade deficit and would need to pay $20-21 billion in the next fiscal year starting from July due to money it has borrowed.
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