ISLAMABAD, Pakistan – China on Thursday agreed to refinance Pakistan with $2.3 billion in funds amid dwindling foreign exchange reserves in the country.
This came at a time when the restoration of the country’s deferred International Monetary Fund (IMF) program hinges on the government’s ability to make a fiscal adjustment of around 2.5% of GDP.
Tax adjustments can be made by increasing revenue and reducing expenditure in the next budgetGeo News reported citing The News.
“Good news: the terms and conditions of the refinancing of a 15 billion RMB deposit by Chinese banks (about 2.3 billion dollars) have been agreed,” said Miftah Ismail, Federal Minister of Finance and Revenue of the Pakistan. a tweet.
“The inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves.
Pakistan’s foreign exchange reserves are under severe pressure and fell by $190 million to $10.308 billion in the week ended May 6, according to the State Bank of Pakistan (SBP).
The country is heavily dependent on foreign loans, as data from the Ministry of Economic Affairs earlier this month showed that Pakistan received only $248 million in foreign loans in April, including $100 million of oil on the deferred payments from Saudi Arabia.
Pakistan is turning to the International Monetary Fund (IMF) to reinstate a $6 billion package agreed in 2019. So far, half of the pledged money has been disbursed. Pakistan would immediately receive a $1 billion loan tranche from the IMF once the two sides settle their differences, according to Indian express.
With the economy in tatters and political instability looming due to protests by former Prime Minister Imran Khan, there is a growing threat that Pakistan will follow the Sri Lankan path if swift action is not taken.
Strategic cooperation between Pakistan and China has grown over the past decades. Economically, China is Pakistan’s largest trading partner and a major investor, particularly in the infrastructure and energy sector. In 2018, bilateral trade between the two countries reached US$18 billion.