ISLAMABAD - Pakistan is expecting to receive $2.1 billion from China shortly that would help in building the foreign exchange reserves of the country, which are under pressure due to massive repayment against previous loans.

“We may receive the amount next week,” said an official of the ministry of finance. He further said that Pakistan is hoping to receive around $2.1 billion from China. Pakistan had requested China to deposit some amount in State Bank of Pakistan (SBP)’s account to boost the country’s foreign exchange reserves. The reserves are under pressure due to the massive repayment against previous loans and interest payment.

Pakistan’s foreign exchange reserves have increased to $15.7 billion after receiving one billion dollars from United Arab Emirates (UAE) recently. The SBP’s held reserves are currently standing at US$8.84 billion while reserves of commercial banks are $6.9 billiob. The UAE had so far deposited $2 billion in SBP’s account since January 2019. The UAE had committed to deposit $3 billion in Pakistan’s central bank account on the request of Prime Minister Imran Khan.

The official said that Pakistan would receive remaining one billion dollar from UAE next month (April). However, the United Arab Emirates had recently refused to grant over $3 billion oil on deferred payment to Pakistan. Finance Minister Asad Umar last week had admitted that Pakistan would not receive oil on defered payment from UAE. The UAE does not give defer oil payment facility to any country, he explained. 

It is worth mentioning here that Pakistan was facing a financing gap of $12 billion after taking into account all projections of dollar inflows during the current fiscal year 2018-19. The incumbent government after coming into power had approached Saudi Arabia, UAE and China for bailout packages.

Saudi Arabia had announced $6 billion package for Pakistan, which included placing $3 billion cash deposits in the account of State Bank of Pakistan. In addition, KSA would also provide a one-year deferred payment facility for the import of oil, worth up to $3 billion. The loan had been made available at 3.18 percent return. Pakistan had already received three billion dollars from Saudi Arabia. Meanwhile, the deferred oil payment facility is also in the pipeline, which would reduce the pressure on the imports of the country.

The successful dealing with Saudi Arabia and UAE reduced pressure on foreign exchange reserves. Therefore, the government had refused to accept tough conditions of the International Monetary Fund (IMF) for new loan programme. IMF had asked Pakistan to increase power and gas tariffs, further devaluing the currency, enhancing taxes and interest rates before going into fresh borrowing programme.

Both the sides are holding negotiations through video link regularly to narrow the differences on programme’s conditions.

The IMF programme is important for Pakistan for restoring policy lending from World Bank and Asian Development Bank. The multilateral sources like World Bank, Asian Development Bank and others will release the loan once Pakistan enters into IMF programme. The IMF has recently appointed its new mission chief for Pakistan Ernesto Ramirez Rigo, who will be visiting Pakistan on March 26 to meet the Pakistani authorities. Meanwhile, the entire mission team of the Fund would visit Pakistan next month wherein both sides could finalize the loan programme.