Crisis-Hit Pakistan Requests China To Delay Upcoming Payment Of $6.3 Billion Loan

Reeling under an economic crisis, Pakistan has requested China to rollover its $6.3 billion debt that is maturing in the next eight months, as part of its overall plan to arrange $34 billion in the current financial year of 2022¨C23 to meet its debt and external trade-related obligations.

Another proposal was also under consideration to seek a fresh Chinese loan to repay the maturing bilateral debt during the fiscal year 2022¨C23, ending June 30, the Express Tribune newspaper reported, as per PTI.

tribune.com.pk

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The issue of rollover and refinancing of nearly $6.3 billion in commercial loans and the central bank debt was discussed in a meeting between Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar on Saturday, the report mentioned. The $3.3 billion in Chinese commercial loans and $3 billion worth of safe deposit loans were maturing from now till June next year, according to the Ministry of Finance officials.

The safe deposit is on the balance sheet of the central bank. In addition to this, over $900 million in bilateral Chinese debt is due during the current fiscal year.

For the current fiscal year of 2022¨C23, the International Monetary Fund (IMF) and the Ministry of Finance have reportedly estimated Pakistan's gross external financing requirements in the range of $32 billion to $34 billion, excluding the impact of the recent devastating floods.

Pakistan has already obtained $2.2 billion in loans during the July-September quarter, while Saudi Arabia has announced plans to rollover $3 billion in debt maturing in December this year.

The country still needs to arrange $29 billion and it is looking for a minimum of $6.3 billion to $7.2 billion in rollover from China in addition to any fresh lending.

The report mentioned that this time the government was seeking rollover of the $3 billion safe deposit for more than one year, preferably for three to five years.

China has extended a total of $4 billion in safe deposits and of this, $1 billion has already been rolled over in July this year.

Pakistan's PM To Visit Beijing On November 1

Pakistan¡¯s Prime Minister, Shehbaz Sharif, is reportedly visiting Beijing on November 1 with a long list of new projects and requests to rollover the existing debt. He is also considering sanctioning new debt and preferential trade treatment for certain exportable goods.

AFP/getty

The crisis-hit country is under pressure from western institutions and governments to seek a rollover of Chinese debt, which currently stands at $26.7 billion, including public and publicly guaranteed debt.

Chinese commercial loans cannot be rolled over but can be refinanced, which requires the government to first pay the maturing debt and then get it back. This consumes significant time, which in turn puts pressure on the foreign exchange reserves until the transaction is not reversed.

China had taken three months' time refinancing a $2.3 billion commercial loan that Pakistan paid back in March. Pakistan's gross foreign exchange reserves currently stand at $7.5 billion, as per the report.

"The finance minister also appreciated the support extended by the Chinese leadership for flood relief and refinancing of syndicate facilities of RMB 15 billion ($2.24 billion) to Pakistan," according to a statement issued by the Ministry of Finance after the meeting. The statement suggests that both sides discussed the issue of commercial loan refinancing.

Pakistan Gets $1.5 Billion Loan From ADB

Last week, the Asian Development Bank agreed to lend $1.5 billion to crisis-hit Pakistan, a country that has seen default risks surge after devastating floods crippled it.

As per the Bloomberg report, the bank approved the loan for social protection, promote food security amid devastating floods and global supply chain disruptions, according to a statement by the Manila-based lender on Friday. The financing will be the single largest inflow since the nation received a $1.1 billion bailout loan in August 2022 from the IMF.

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