$2b Loan Rollover Request To China Made By The Government

The government of Pakistan made a request to China for a $2 billion worth of debt rollover which is maturing very soon but forgot to book IMF and Chinese loans in the budget, and unpublished $7 billion in foreign borrowing for the next fiscal year.

On Saturday Federal Minister of Finance Miftah Ismail admitted that some Chinese and IMF loan exclusion was by mistake and would be rectified. After the correction and duly notified foreign economic assistance plan of Pakistan for the fiscal year 2022-23 will increase to a record $24 billion.

A minimum loan of $3 billion from IMF and $4 billion loans from China’s State Administration of Foreign Exchange (SAFE) have not been included by the government in its foreign receipts. The receipts of IMF are linked with its bailout package revival.

Before the end of the current $1 billion SAFE deposit loan from China is maturing whereas by the end of next month another $1 billion loans from China will mature. According to the officials, China is requested to roll over both the loans by the Prime Minister of Pakistan Mr. Shehbaz Sharif. This is in March, earlier SAFE deposit loans of $2 billion were rolled over by China.

However, in the next year's fiscal borrowing plan, these $4 billion worth of loan rollovers were not shown by the Ministry of Finance. The external receipts are estimated at Rs3.13 trillion or $17 billion for the fiscal year 2022-23 showed in the budget books. These loans are for project financing, building foreign exchange reserves, and budget support.

However, in the next fiscal year, the borrowing plan will increase to $24 billion after including $3 billion in loans from IMF and $4 billion from SAFE deposit loans of China in the external receipts.

The Finance Minister of Pakistan Mr. Miftah Ismail is hoping that the loan size would be increased from $6 billion to $8 billion by IMF.  The global lender has already disbursed the amount of $3 billion. The government will have to show in its annual plan the borrowing amount of $5 billion from IMF if the loan size is increased to $8 billion.

According to the sources, to convince the IMF of the revival of the loan program a lot of effort is needed, due to some revenue measures and expenses announced in the budget were not as per IMF’s expectations. Officials are expecting difficult bargaining with IMF in the coming days. Some budgetary measures might have been reversed to seek approval from IMF for the budget.

The amount of Rs1.4 trillion, or $7.5 billion has been shown in the next years borrowing plan of foreign commercial loans by the government, which are mostly commercial loans from China.

A deal for rollover of RMB 15 billion or $2.2 billion of Chinese commercial loans was announced by the finance minister last week. The government of Pakistan is still waiting for the disbursement which was expected to be received within a few days of the deal.

During former PM Imran Khan's visit to China in February 2022, Beijing requested a lifeline of a total of $21 billion including a $10.7 billion rollover for both SAFE deposit and commercial loans.