The central bank of Pakistan has announced that it had received a loan of $1 billion from China, bringing the country’s foreign exchange reserves back to over $4 billion after falling to less than $3 billion a few months ago.
China to the rescue
Pakistan is currently going through a financial crunch, struggling to make ends meet for its population and, thus, seeking financial help from every door possible.
Speaking at the National Assembly Standing Committee on Finance, Pakistan’s finance minister Ishaq Dar said that China and Pakistan had reached an understanding regarding the repayment and refinancing of the maturing $1.3 billion commercial loan and the $1 billion State Administration of Foreign Exchange deposit.
Meanwhile, Pakistan has to pay back an earlier loan of $300 million to the Bank of China on 26th June. But Dar assured everyone that they had reached an agreement with China on the said matter and said that the loan from China of $1 billion would be given in two instalments.
A few days ago, Dar stated that China understands Pakistan’s complex economic conditions and is willing to support the country financially.
Pakistan blames Geopolitics
This comes after Pakistan’s Finance Minister blamed ‘geopolitics’ for a stalled International Monetary Fund loan package and accused global institutions of wanting the Islamic Republic to default like Sri Lanka. He also said that the IMF had given no reason for delaying the ninth review, which has been pending since November 2022.
The IMF signed an agreement with Pakistan in 2019 to supply $6 billion once the country meets all conditions. However, the plan was delayed several times, and the full payment is still pending as Pakistan must complete all requirements set by the IMF.
Pakistan has only two weeks to meet the IMF’s conditions to qualify for the bailout package, as it will collapse at the end of June 2024. Dar meanwhile said that the country would not default even if the IMF bailout package were not released. He also praised China, saying they realised the ‘geopolitics’ behind the IMF delay.
Budget dilemma
His remarks came after the IMF raised doubts about Pakistan’s fiscal year 2024-24 budget, calling it a “missed opportunity”. The Shehbaz Sharif-led government unveiled a PKR 14.4 trillion budget last week.
Dar said IMF’s doubts about the current budget might be valid. Still, the agriculture, IT, and Small and Medium sectors were the drivers of growth for the country, and exemptions given to these sectors were inevitable to ensure Pakistan’s economic growth, which currently stands at 0.29%.
To justify his statement, he gave an estimate and said a return of $2.5 billion was expected from the IT industry this year, which would increase to $4.5bn next year.
Pakistan’s economy has been in a free fall mode for the last few years, putting pressure on the poor masses through record-hitting inflation and squeezing out people to make ends meet.
