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.
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.