Pakistan has made another request to China for the renewal of $2 billion in debt maturing soon, but it forgot to account for Chinese and International Monetary Fund (IMF) loans in the budget, under-reporting the foreign borrowings of $7 billion for the next fiscal year.
Finance Minister Miftah Ismail admitted on Saturday that the exclusion of the IMF and some Chinese loans was a mistake that would be rectified. Once the correction is made and duly notified to the National Assembly, Pakistan’s foreign economic aid package for the financial year 2022-23 will reach a record $24 billion.
The government did not include $4 billion in China State Administration of Foreign Exchange (SAFE) loans and a minimum of $3 billion in IMF loans in its foreign receipts. The IMF’s receipts are linked to the revival of its bailout plan.
A $1 billion Chinese SAFE deposit loan matures before the end of the current month, while another $1 billion loan will mature before the end of next month.
Prime Minister Shehbaz Sharif has formally requested the Chinese government to roll over the two maturing loans, officials say.
Earlier, in March this year, China renewed more than $2 billion in SAFE deposit loans.
However, the Department of Finance did not show these $4 billion loan renewals in next year’s borrowing plan. Budget books showed total external revenue was estimated at $17 billion, or Rs 3.13 trillion, for the financial year 2022-23.
These loans are contracted for budgetary support, the constitution of foreign exchange reserves and the financing of projects.
However, after including $4 billion in Chinese SAFE deposit loans and the remaining $3 billion in IMF loans as external revenue, the borrowing plan will increase to $24 billion in the next fiscal year.
Finance Minister Miftah Ismail had expressed hope that the IMF would increase the loan amount from a total of $6 billion to $8 billion.
An amount of 3 billion dollars has already been disbursed by the global lender. If the loan amount is increased to $8 billion, the government will have to show a $5 billion loan from the IMF in its annual plan.
Sources said a lot of effort was needed to convince the IMF to restart the lending program, as some of the spending and revenue measures announced in the budget were not in line with IMF expectations. The authorities expect tough negotiations with the IMF team in the coming days.
They said the government might have to roll back some of the fiscal measures to get IMF approval for the budget.
The government has indicated $7.5 billion, or 1.4 trillion rupees, in foreign commercial loans in its borrowing plan for next year. These are largely Chinese commercial loans.
Last week, the Minister of Finance announced an agreement with China for the renewal of $2.2 billion, or 15 billion RMB, of Chinese commercial loans. Pakistan is still awaiting the payment, which it hoped to receive a few days after the agreement.
During former Prime Minister Imran Khan’s visit to Beijing in February this year, Pakistan requested a total lifeline of $21 billion, which included the renewal of $10.7 billion in commercial loans and of SAFE deposits.
These included the rollover of SAFE deposits of $4 billion and commercial loans of $6.7 billion at maturity.
Pakistan has only $9.2 billion in foreign exchange reserves as of last week and its currency is depreciating rapidly. The rupee fell to the lowest level of Rs203 per dollar in the interbank market.
Pakistan had also requested to increase the size of the currency swap facility from $4.5 billion to $10 billion – an additional borrowing of $5.5 billion, which the Chinese authorities did not have. approved at the time.
Budget documents showed Pakistan planned to launch $2 billion worth of sukuk and international Eurobonds in the next fiscal year. It can only get a better price if the IMF program is reinstated as foreign investors fear a default on previous obligations.
The government is expected to secure a $1.2 billion loan from the Islamic Development Bank to purchase deferred-payment oil and $800 million worth of oil facilities from Saudi Arabia in the next fiscal year.
It has also budgeted $1.5 billion in project funding. The program’s loans are estimated at $4 billion in the next fiscal year, including $1.6 billion under Naya Pakistan certificates – a product of the previous PTI government.
Published in L’Express Tribune, June 12e2022.
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