China pumps-in USD 2.2 billion in Pakistan's dwindling forex reservestext_fields
Islamabad/Karachi: China on Monday pumped-in USD 2.2 billion to cash-strapped Pakistan to shore up its close ally's foreign currency reserves and help avert a possible default on external debt payments.
With the generous Chinese assistance, Pakistan has so far received a total of USD 9.1 billion in financial assistance packages from friendly countries during the current fiscal year, The Express Tribune reported.
While China has pumped-in USD 4.1 billion from China, Pakistan has got USD 3 billion from Saudi Arabia and USD 2 billion from United Arab Emirates (UAE), it said.
"The State Bank of Pakistan has received RMB 15 billion value equivalent to USD 2.2 billion as proceeds of the loan obtained by the government of Pakistan from China," the central bank tweeted.
Finance Ministry Spokesperson Khaqan Hassan Najeeb said the funds deposited in the State Bank of Pakistan would strengthen the stability of the country.
The SBP's reserves stood at USD 8.84 billion as on March 15, 2019, according to the central bank's latest weekly report. The latest deposits came from Beijing are expected to boost the SBP'S reserves into double digit after a gap of almost one year, the report said.
The comparatively higher imports than exports and debt repayments did not allow the reserves to stay stable, as the government was partially financing such international payments using the reserves.
Apart from the financial help, Riyadh has also enabled a USD 3 billion petroleum oil supply line on deferred payment for Pakistan as well.
Finance Minister Asad Umar has estimated a financing gap of around USD 12 billion for the ongoing fiscal year 2019 and another USD 7-8 billion for the fiscal year 2020, the report said.
The friendly countries have extended the soft loan at an interest rate ranging 2.5-5 per cent to shore up SBP's foreign currency reserves and averting payment default.
Pakistan is also negotiating with the International Monetary Fund for an aid package but talks have been inconclusive, media reports said.
Earlier, the UAE had announced a USD 6 billion package for Pakistan in December 2018 including USD 3 billion in cash deposit and a credit line of another USD 3 billion for the supply of petroleum on deferred payment.
However, Pakistan has not been able to secure the USD 3.2 billion oil on deferred payments facility from the UAE.
"The deposits are coming at a very critical time as Islamabad is set to make a large external debt payment next month April, while its reserves remain under pressure, Arif Habib Limited Head of Research Samiullah Tariq said recently.
"Pakistan is scheduled to pay off USD 1 billion for a maturing Eurobond in April.. this will be in addition to other external debt payments during the month," he said.
The increased international payment pressure led to depletion of Pakistan's foreign currency reserves to almost five-year low at USD 6.63 billion as on January 18, 2019.