A Chinese bank has committed to provide Pakistan with another refinanced $500 million loan within the next few days. This brings the total of commercial loans to $1.7 billion out of the committed amount of $2 billion.
Pakistani authorities are currently seeking 100 per cent confirmation from friendly donor countries and multilateral creditors before moving towards an agreement with the International Monetary Fund (IMF). The IMF has set an unwritten condition that Pakistan must secure refinancing of commercial loans and a rollover on deposits from China during the program period, which is set to expire in June 2023.
A top official from the Finance Division confirmed that another $500 million commercial loan from a Chinese bank is on its way and will be completed soon. Chinese banks have already provided refinancing of $1.2 billion in commercial loans in the past few weeks, and Beijing has given assurance on another $500 million in loan refinancing in the next few days. Pakistan has also requested a rollover on the Chinese SAFE deposit of $2 billion within the ongoing month.
All these factors are prerequisites for moving towards the signing of a staff-level agreement between the IMF and Pakistan. The Pakistani authorities are waiting for confirmation from Saudi Arabia, UAE, and Qatar, as well as from the World Bank and the Asian Infrastructure Investment Bank, to fulfill the external financing needs of $6 billion until the end of June 2023. The guarantees for securing external financing are crucial for the sustainability of the IMF program.
Brent crude and WTI are both down in the international market, which is good news for Pakistan’s economy. However, the IMF has secretly launched “Inclusive growth in the MENA region” at NUST. The IMF high-ups argued that state-owned enterprises (SOEs) possessing a major footprint resulted in the crowding out of the private sector. Pakistan’s budget makers have also assured the IMF that they will prepare gender-based budgeting in the next financial year.
To meet the IMF’s demands, the CPI-based and SPI-based inflations have risen to unprecedented levels of 31.5 per cent every month and 42.3 per cent every week. The development budget of the federal government, known as the Public Sector Development Program (PSDP), has been slashed by 50 per cent for the current fiscal year in line with the Fund’s demand to curtail the budget deficit target.
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