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Chinese bank deposits another $500m to Pakistan

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  • Ishaq Dar says SBP received the amount in its account.
  • Second disbursement part of $1.3 billion facility.
  • Finance czar hopes $500m will shore up forex reserves.

Pakistan on Friday received $500 million — the second disbursement of the $1.3 billion facility — from the Industrial and Commercial Bank of China (ICBC).

Federal Minister for Finance and Revenue Senator Ishaq Dar announced the development on his Twitter handle. 

He wrote: “State Bank of Pakistan has received today in its account from Chinese Bank ICBC $500 million. It will shore up the forex reserves of Pakistan. AlhamdoLilah!”

The second critical disbursement from the Chinese bank came after Pakistan completed the necessary documentation.

Earlier this month, the Chinese lender had approved a rollover of a $1.3 billion loan for Pakistan. 

Following the announcement, the Chinese bank deposited $500 million — the first disbursement — on March 4 which helped the foreign exchange reserves surpass the $4 billion mark.

The cash-strapped country has faced growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.

Earlier, Dar — who took charge of the finance ministry in September last year — said that Pakistan has made payments of around $5.5 billion (excluding the $1 billion sukuk payment). These include $2 billion to China Development Bank and ICBC and $3.5 billion have been given to banks in other countries.

“Debt is usually rolled over but the debt stock does not reduce. We are reducing debt stock,” he had said. “Formalities with ICBC were completed last night. We returned $1.3 billion to it and this facility has been renewed and we will receive the amount back in three tranches.”

“We paid back $1.3 billion in three tranches — $500 million, $500 million and $300 million. We will receive it back the same way. Pakistan will get $500 million in two-three days. We might receive it on Monday. Then we will get an additional $500 million in 10 days.”

Foreign exchange reserves were at $4.3 billion as of March 10, just enough for less than a month of imports. While the liquid foreign exchange reserves stand at around $9.8 billion which includes $5.5 billion in net reserves held by commercial banks.

A report published in The News stated that a Chinese bank has given assurances it will provide another refinanced $500 million loan within the next few days, bringing the total of commercial loans up to $1.7 billion out of the total committed amount of $2 billion.

The Pakistani authorities are running from pillar to post to get 100% confirmation from friendly donor countries and multilateral creditors before moving toward striking a staff-level agreement with the International Monetary Fund (IMF).

It was the unwritten condition of the IMF that Pakistan must secure the refinancing of commercial loans as well as a rollover on deposits from China during the programme period, which is scheduled to expire in June 2023.

“Another $500 million commercial loan is coming from a Chinese bank,” a top official of the Finance Division confirmed on Wednesday and added that it would be done soon.

Chinese banks have already provided re-financing of $1.2 billion in commercial loans in the past few weeks, and now Beijing has given an assurance on another $500 million in loan re-financing in the next few days.

It is relevant to mention that Pakistan had also requested to grant rollover on the Chinese SAFE deposit of $2 billion within the ongoing month.

All these, the refinancing of commercial loans and rollovers on SAFE deposits, are pre-requisite for moving towards the signing of a staff-level agreement between the IMF and Pakistani side.

Now Pakistani authorities are anxiously waiting for confirmation from the Kingdom of Saudi Arabia, the UAE, and Qatar, as well as from the World Bank and the AIIB, for fulfilling their external financing needs of $6 billion until the end of June 2023.

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“Ready to work with Pakistan’s new government,” the IMF said.

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In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

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In a new IMF agreement, Pakistan would “raise” the FBR tax-to-GDP ratio to 15%.

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The state bank reserves will be maintained at a level equivalent to three months’ worth of import bills, according to sources in the Finance Ministry.

According to sources, the ministry has also set a goal to maintain the primary balance surplus and reduce the current account deficit.

The ministry insisted that once the existing agreement expires, a new one would be negotiated with the IMF, and that the IMF will also be guaranteed that the requirements will be implemented prior to the agreement being finalised.

The founder of Pakistan Tehreek-e-Insaf (PTI) demanded that an audit of the election results be conducted before the International Monetary Fund (IMF) approved any additional loans for Islamabad. However, the IMF showed earlier today that it was eager to cooperate with the new administration in Pakistan by disregarding the demand.

According to Bloomberg News yesterday, Pakistan is to apply for a fresh $6 billion loan from the International Monetary Fund to assist the next government in paying off billions of dollars in debt that comes due this year.

According to the article, the nation would attempt to negotiate an Extended Fund Facility with the IMF, and it was anticipated that discussions with the international lender would begin in March or April.

Thanks to a short-term IMF bailout, Pakistan avoided defaulting last summer. However, the plan expires next month, and the next administration will need to negotiate a long-term deal to keep the $350 billion economy steady.

The IMF forced the South Asian country to enact a number of reforms prior to the rescue, including raising its benchmark interest rate, changing its budget, and raising the cost of natural gas and electricity.

According to a fund spokeswoman, the IMF staff is still in communication with authorities on the necessary longer-term reform initiatives. The fund is also prepared to assist the post-election government in addressing Pakistan’s ongoing issues by means of a new arrangement, should that request be made.

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39% increase in IT exports in January: Dr. Umar Saif

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According to Dr. Umar Saif, the acting minister for information technology and telecommunication, IT exports increased by 39.4% to $265 million in January of this year from $190 million in the same month the previous fiscal year.

The IT sector in Pakistan is expanding and breaking records. The minister wrote on X that “IT exports in January are up by 39.4% to $265 million, compared to $190 million in the same month in 2023.”

The minister also revealed that IT exports to the United States over the first seven months of the current fiscal year (July–January) were $1.7 billion, up 13 percent from $1.5 billion in the same time previous year.

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