State Bank of Pakistan confirmed on Friday that China has refinanced a $1 billion loan to Pakistan which has boosted the dwindling reserves to over $4 billion again.
Finance Minister Ishaq Dar announced on Friday that China will return the $1 billion commercial loans as Pakistan had paid back the loan 18 days earlier after reaching an agreement to waive the prepayment penalty, reported Tribune.
According to the reports, China released the $1 billion on Friday while $300 million of commercial debt will be refinanced soon. State Bank foreign reserves have fallen below $3 billion after paying $1 billion to China’s Development Bank on Monday while the $300 million was due by June 26th.
“Pakistan’s assets are solvent and worth more than $6 trillion, so people should not be worried about $100 billion external public debt repayments,” stated Dar speaking to the Senate Standing Committee on Finance and Revenue. He also expected the exchange rate to improve up to Rs. 244 and asked people to stop talking about default.
The cash-strapped country is struggling to secure fresh loans to complete IMF’s 9th review as it faces a $6 billion refinancing gap despite strangling the economy. The IMF program is due to expire by 30th June as Finance Ministry made its last desperate attempt to strike a deal this week and failed.
IMF has raised questions over the budget numbers, especially non-tax revenue, FBR tax collection, and lack of efforts to broaden the tax base. IMF has termed it a ‘missed opportunity’ but reiterated that the fund will remain engaged to discuss policies and maintain stability.
Before announcing the budget, the finance minister had declared that further IMF negotiations will be carried out by the upcoming government. The elections are expected around October and Pakistan has to secure loans in the interim to avoid default.
