Islamabad: Pakistan is seeking US$5 billion in loans from China, Russia and Kazakhstan as the country makes desperate efforts to stabilise its dwindling forex reserves, a media report said.
Pakistan plans to borrow $3 billion from China and $2 billion from Russia and Kazakhstan. Pakistan’s foreign exchange reserves declined by $552 million or 2.3 percent in the week ended January 14. The new borrowing plan comes days after Pakistan raised $1 billion with a 7-year sukuk, offering an interest rate of 7.95%, the highest return the South Asian nation has ever paid on an Islamic bond.
Pakistan’s finance ministry has finalized the plan for the $3 billion loan from China and an agreement in this regard will likely be signed during Prime Minister Imran Khan’s visit to Beijing next month. Islamabad is planning to spend $2 billion on the ML-1 Railways project (from Karachi to Peshawar) while the $3 billion from China will be used to strengthen dwindling forex reserves. Initially, the loan agreement with China will be signed for a one year period.
China has already placed around $11 billion with Pakistan in the shape of commercial loans and foreign exchange reserves support initiatives, including $4 billion in SAFE deposits. Last month, Pakistan also received a Saudi loan of $3 billion, which the country has consumed.
The latest development comes amid Islamabad’s hectic efforts to revive the stalled $6 billion loan programme of the International Monetary Fund as all the prior conditions have been met in this regard before the Executive Board’s meeting scheduled on February 02.
According to The News, Pakistan’s gross financing requirements are estimated to go up to $30 billion in the next budget for 2022-23, leaving no other options for the government but to seek a fresh loan from the International Monetary Fund (IMF) after the expiry of the existing programme in September 2022.
Top official sources confirmed to The News that if everything goes well and Islamabad manages successfully to revive the existing stalled IMF programme worth $6 billion Extended Fund Facility (EFF) after completion of the sixth review, then two more reviews seventh and eighth would be required to be accomplished till September 2022 for qualifying to complete the 39-month EFF programme.
Despite the National Security Policy recently approved by the federal cabinet, which advises refraining from getting loans from the IMF and other multilateral creditors, Islamabad, in reality, will have no other option but to get a loan from the Breton Woods Institutions (BWIs) in the wake of yawning gross financing requirements.