Cash-strapped Pakistan has requested its all-weather ally China to fast-track the refinancing of maturing commercial loans of USD 1.3 billion and apprised it of the diminishing prospects of revival of the IMF loan programme, a media report said on Tuesday.
The request was made on Monday by Finance Minister Ishaq Dar during a meeting with China’s Charge d’affaires Pang Chunxue, The Express Tribune newspaper reported.
Officials said that the finance minister raised the issue of refinancing the two Chinese commercial loans amounting to USD 1.3 billion, maturing in the next two to three weeks.
Chinese authorities have already assured Pakistan that they will refund both loans, but Islamabad wants the money to be re-lent as soon as it is paid back, the report quoted sources as saying.
Dar urged the Chinese charge d’affaires about timely refinancing the loans, which will prop up Pakistan’s foreign exchange reserves.
Pakistan is scheduled to make a debt repayment of USD 300 million to the Bank of China in less than two weeks. The cash-strapped country is also expected to repay another USD 1 billion to China Development Bank within three weeks.
The country’s official foreign exchange reserves stand at USD 3.9 billion, and any delay in refinancing the loans could pull the reserves much below the USD 3 billion mark.
“The finance minister further updated the charge d’affaires about progress on talks with the IMF on completion of the ninth review,” a statement by the Ministry of Finance said.
Pakistan and the International Monetary Fund (IMF) have failed to reach a staff-level agreement on the much-needed USD 1.1 billion bailout package aimed at preventing the country from going bankrupt.
The funds are part of a USD 6.5 billion bailout package the IMF approved in 2019, which analysts say is critical if Pakistan is to avoid defaulting on external debt obligations.
Dar said that the IMF was not accepting Pakistan’s request to lower the requirement of arranging USD 6 billion in new loans despite a marked reduction in the current account deficit, according to the officials.
Pakistan arranged USD 4 billion, but the global lender was still insisting on USD 6 billion in fresh loans, he added.
The minister said there was hope that after arranging USD 3 billion, the IMF would sign the staff-level agreement, but that did not happen.
“After the agreement, there is hope that the World Bank will approve USD 450 million and the Asian Infrastructure Investment Bank will give USD 250 million.”
However, budget books showed that the government did not expect the USD 3 billion to come before June 30 and included the inflows in the next fiscal year’s estimates.
Officials said that the Chinese diplomat was informed in Islamabad that even though the government did its best, the IMF programme would end on June 30.
Dar made it clear on Saturday that there was no chance the tenth review would be completed, even as the IMF is stuck to its position of clubbing the ninth and tenth programme reviews.
Last week, he said that Pakistan was contemplating requesting the bilateral creditors for debt restructuring and reiterating the threat of default. Refuting the plans, State Bank Governor Jameel Ahmad said in a background briefing that “as of now, there is no plan to enter into any debt restructuring”.
“We should give hope to the people that Pakistan will come out of this crisis, and there is no need to panic about the possibility of default,” Dar said on Monday while addressing a seminar, according to the report.
The Pakistan government on Friday unveiled a Rs 14.4 trillion budget for 2023-24 as it battled to fend off a looming default due to shrinking foreign reserves.
Pakistan's efforts to unlock access to the already agreed USD 6.5 billion loan package with the IMF are in a quagmire as the budget needs to satisfy the global lender to secure the release of more bailout money for the cash-strapped country.
Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.