Tag: commercial loans

Pakistan’s IMF bailout programme revival delayed: blame game between Pakistani authorities and IMF

Pakistani authorities and the International Monetary Fund (IMF) are blaming each other for the delay in reviving the IMF bailout programme. The IMF approved a $6.5 billion bailout package for Pakistan in 2019, of which $1.1 billion is still outstanding.

However, issues related to fiscal policy adjustments have delayed the release of the funds since November. The delay has raised concerns as Pakistan has less than a month’s worth of foreign exchange reserves and needs the IMF package to avert defaulting on external payment obligations.

With the expiry of the existing IMF programme on June 30, 2023, Pakistan’s options for reviving the IMF programme are shrinking with every passing day.

While Pakistani authorities argue that the IMF is playing politics, IMF sources say they are still waiting for confirmation on the remaining $2 billion from the World Bank and Asian Infrastructure Investment Bank, as well as seeking commercial loans from banks.

According to Geo, Dr Khaqan Najeeb, former adviser Ministry of Finance, has called for short-term measures, such as funding from friendly countries, the revival of the IMF programme, clarity on programme completion dates, and work on the budget for 2023-24 to be undertaken to avoid Pakistan being near the brink of default.

May 2, 2023
Pakistan receives $500 million in second disbursement from Chinese bank ICBC

On Friday, Pakistan received a sum of $500 million, which is the second disbursement of the $1.3 billion facility from the Industrial and Commercial Bank of China (ICBC). Senator Ishaq Dar, the Federal Minister for Finance and Revenue, announced this development on his Twitter handle, adding that the funds will help shore up Pakistan’s forex reserves.

State Bank of Pakistan has received today in its account from Chinese Bank ICBC US $ 500 million. It will shore up forex reserves of Pakistan.
AlhamdoLilah! https://t.co/dIHmfBLlvD

— Ishaq Dar (@MIshaqDar50) March 17, 2023

The Chinese bank made this critical disbursement after Pakistan completed the necessary documentation. Earlier in March, the ICBC approved a rollover of a $1.3 billion loan for Pakistan, following which the bank deposited $500 million, the first disbursement on March 4, which helped the foreign exchange reserves exceed $4 billion.

Pakistan, which has been facing growing economic challenges such as high inflation, sliding forex reserves, a widening current account deficit, and a depreciating currency, has made payments of around $5.5 billion (excluding the $1 billion sukuk payment) to China Development Bank and ICBC, with $3.5 billion given to banks in other countries. To reduce the debt stock, Pakistan has been paying off debts in tranches, and now the country will receive the $1.3 billion back in three tranches.

The current foreign exchange reserves of Pakistan stand at $4.3 billion as of March 10, which is barely enough for less than a month of imports, while the liquid foreign exchange reserves stand at around $9.8 billion, including $5.5 billion in net reserves held by commercial banks. According to a report published in The News, a Chinese bank has given assurances that it will provide another refinanced $500 million loan in the next few days, bringing the total of commercial loans up to $1.7 billion out of the total committed amount of $2 billion.

According to The News, Pakistan has also requested a rollover on the Chinese SAFE deposit of $2 billion within the ongoing month. These actions, such as the refinancing of commercial loans and rollovers on SAFE deposits, are pre-requisites for moving towards the signing of a staff-level agreement between the IMF and the Pakistani side. Currently, Pakistani authorities are waiting for confirmation from the Kingdom of Saudi Arabia, the UAE, and Qatar, as well as from the World Bank and the AIIB, to fulfill their external financing needs of $6 billion until the end of June 2023, and the situation remains tense.

March 18, 2023
Chinese bank to provide Pakistan with another $500 million loan soon

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.

March 16, 2023