Cash-strapped Pakistan has received a rollover of $2 billion in deposits for a period of one year from its all-weather ally China to help Islamabad get a much-required bailout from the IMF to stabilise its economy, a media report said on Friday. The rollover, which basically is not a loan but a financial deposit to be kept at Pakistan’s central bank for a period of one year, is one of the requirements of the International Monetary Fund (IMF) in meeting its external financing needs in order to move towards inking the staff-level agreement, The News International reported.
Minister for Finance Ishaq Dar confirmed the development. “Yes,” Dar was quoted as saying in a brief response when asked about getting a rollover of $2 billion SAFE (State Administration of Foreign Exchange) deposits from China. Pakistan and the IMF have been negotiating the release of a $1.1 billion loan since February but so far without any success due to the tough conditions by the donor which Pakistan is slow to fulfil.
Pakistan is scrambling to increase its forex reserves which are estimated to be at $4.8 billion after China refinanced $500 million last week. Earlier, a Chinese bank provided $700 million to Pakistan. Despite a slight improvement in the reserves, the situation is still grim as the country needs to pay $7 billion till June this year, making further borrowing necessary. Efforts to secure a loan from the IMF have been unsuccessful so far, which is expected to open avenues for further borrowing from the international market or getting loans from friendly countries.
There are nine tables under the Memorandum of Economic and Financial Policies (MEFP) that are required to be filled, the report said. One of the tables is related to the Net International Reserves (NIR) as an indicative target, which cannot be fulfilled without incorporating the external financing needs of the program period till the end of June 2023.
Separately, Geo News reported on March 7 that Pakistan communicated to the IMF that it requested China to roll over $2 billion SAFE deposits by a year. The total Chinese SAFE deposits stood at $4 billion and the remaining maturity would become due in a few months.
According to the report, the Ministry of Finance and State Bank of Pakistan (SBP) shared their external financing plan during virtual parleys with the Washington-based IMF, saying that it plans on raising its dwindling foreign exchange reserves to the $10 billion mark by end of June. China’s support has been critical as it has already provided financial support in this critical hour to help Pakistan avoid the default.