As the economic crisis in Pakistan worsens, China provided a loan of $2.3bn to the cash-strapped country. The funds were received after a discussion with the International Monetary Fund(IMF).
Highlights:
- Pakistan received a loan of $2.3 billion from China.
- Tight fiscal budget for 2022-23 announced.
The ebbing cash reserves of Pakistan received the promised RMB 15 billion($2.3 billion) from a Chinese consortium of banks. The assistance will ease the pressure off the Shenaz Sharif government currently going through depleting foreign reserves.
On June 22, Pakistan Finance Minister Miftah Ismail announced that a loan facility agreement was signed between the two nations. He also added that the inflow was expected in a few days and thanked the Chinese government. Further, on Friday, June 24, the finance minister tweeted that the Chinese consortium loan of RMB 15 billion was credited to increase the foreign exchange reserves.Â
Ismail said that the visit of Foreign Minister Bilawal Bhutto-Zardari and the follow-up discussions by Shenaz Shariff with the Prime Minister of China, Li Keqiang, led the Chinese to help at a lesser interest rate of 1.5pc plus Shanghai Interbank Offered Rate (Shibor) instead of earlier 2.5pc plus Shibor.
Talks with the IMF:
Pakistan and the IMF said that the bailout talks are making progress. Both the parties are said to have agreed upon the budget and fiscal measures. Pakistan is expecting the lender to increase the duration and the size of the $6bn, 39-month facility. Further, Pakistan announced a 9.5 trillion rupee ($47bn) budget for 2022-2024 earlier this month. The budget focused on a compact fiscal consolidation to convince the IMF to restart the much-required bailout payments.
Though the Chinese assistance will help Pakistan revive its bleak economy that fell below the $9 billion mark, the country urgently requires $23 billion to meet its foreign exchange requirements for 2022-23. The Pakistani rupee is one of the worst-performing Asian currencies at over 207 to a US dollar. If correct measures are not in place, Pakistan will be living off debt and fall prey to the Chinese debt trap.
