Ahmed Mukhtar Naqshbandi
ISLAMABAD: Pakistan and China have reached a deal for a $700 million commercial loan, Finance minister Ishaq Dar confirmed on Twitter, rekindling hopes for a total of $2 billion injection from the friendly neighbour.
The minister wrote on Twitter, “Formalities completed and Board of China Development Bank has approved the facility of $700 million for Pakistan. This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves!”
Formalities completed and Board of China Development Bank has approved the facility of US $ 700 million for Pakistan. This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves!
— Ishaq Dar (@MIshaqDar50) February 22, 2023
The agreement for the $700 million loan was reached at the weekend. The development came days before Pakistan was set to return another $300 million Chinese commercial loan. The move might temporarily aid the extremely thin foreign currency reserves of the cash-strapped South Asian economy until the revival of the International Monetary Fund (IMF) bailout package.
Pakistan’s dwindling foreign exchange reserves
Pakistan’s foreign exchange reserves held by State Bank of Pakistan (SBP) were recorded at $3,192.9 million as of February 10, up $276 million as compared to $2,916.7 on February 3, according to a statement by the central bank.
Meanwhile, the net foreign reserves held by the country’s commercial banks stood at $5.5 billion, taking the country’s total liquid foreign reserves to $8.7 billion. However, State Bank did not mention any specific reason for the jump in the reserves.
Pakistan has been eyeing an agreement with the IMF that would not only lead to a disbursement of $1.2 billion but also unlock inflows from friendly countries. The two parties have moved closer to reviving the Extended Fund Facility (EFF) as the lender responded to the Memorandum of Economic and Financial Policies (MEFP) draft.
