Pakistan Government Seeking $21bn Support From China

A Finance Ministry source informed the Business Recorder that, to tackle with financial challenges and meet the financial needs of future Pakistan government is seeking financial support of around $21 billion from the Chinese government via existing loans rollover of $10.73 billion and a deposit found of $ 10 billion.

Giving the details the sources stated that many agenda points were discussed during the China visit of the Prime Minister, which includes Finance Ministry submissions for the rollover of all finance facilities which are $6.73 billion of commercial loans and $4.0 billion of SAFE deposits, where $2.0 billion SAFE deposit is maturing on Mar 23, 2022.

The Prime Minister had duly signed the rollover request which had already been made in January 2022. Furthermore, RMB 15 billion 3 years commercial loan which is equivalent to $2.23 billion taken from the group of ICBC, CDB, and BOC is also maturing on Mar 25, 2022.

The sources stated that for refinancing Finance Ministry had been in contact with CDB and on Jan 27, 2022, a formal request had been sent also. All other commercial loans and deposits will mature at later dates. Sources informed that a $10 billion deposit fund is also requested by the Pakistan government. Additionally, a currency swap arrangement increase to $15 billion is also proposed by the State Bank of Pakistan.

The sources confirmed that additional SDRs had been allocated by the International Monetary Fund (IMF) in August 2021 to its member countries with the focus to help the member countries during the pandemic. China’s allocation share was SDR 29.22 billion. Pakistan Finance Ministry has requested Chinese concordance to use the portion of its share via IMF mechanism put in place or bilaterally.

The sources also informed that Pakistan Government re-negotiated the Power Purchase Agreements (PPAs) with IPPs, excluding CPEC-IPPs, which substantially reduced the energy cost from these IPPs. In the same manner negotiations with CPEC-IPPs are planned and the energy cost from CPEC-IPPs will be expected to reduce by $14.29 billion over the life span of the IPPs. Although Islamabad's informal talks with the Chinese Embassy showed that China is willing to cancel out the excessive $14.29 billion via any source other than PPAs reopening with CPEC-IPPs.

The sources stated that a roadshow proposal in China is made by the State Bank of Pakistan asking entrepreneurs, investors, sponsors of China for establishing digital banks in Pakistan.

State Bank Pakistan proposed dialogue regarding Central Bank Digital Currency (CBDC) cooperation between SBP and People’s Bank of China to support Pakistan in evaluating the risks which are associated with CBDCs.

On Feb 11, 2022, in a meeting chaired by PM Imran Khan, the Governor of SBP requested the assistance of the Foreign Affairs Ministry to arrange the meeting between two countries Governors of Central Banks for discussing the proposals which were submitted.

The sources stated that the Finance Ministry has advised Moin ul Haque Ambassador of Pakistan to China for following up on three proposals related to budgetary needs and Pakistan’s external account stability with Chinese authorities. And advised assisting in arranging meetings between Central Banks governors of both countries for discussing the proposals.


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