A senior government source as per media reports told Reuters that a rollover of a $2 billion Chinese loan to Pakistan that was due on March 23 is underway.
The rollover is essential for foreign exchange reserves that have fallen to only four weeks of import coverage as the country is now engaged in fruitless negotiations to get bailout money from the International Monetary Fund (IMF).
Earlier, China agreed to roll over $2 billion in State Administration of Foreign Exchange (SAFE) deposits for Pakistan for one year, aiding Pakistan in fulfilling one of the conditions established by the IMF for it to meet its external funding needs and advance toward a staff-level agreement.
The rollover is a financial deposit to be retained at the central bank rather than a loan.
In light of the impending danger of Pakistan failing to make its international debt repayments, officials from the finance ministry believed that the country would soon obtain money from Saudi Arabia and the United Arab Emirates as well.
They noted that China was anticipated to provide $300 million this month, bringing the nation’s foreign reserves above $5 billion.
It is important to remember that Pakistan said a day earlier that Saudi Arabia had offered it more financing that might assist end the IMF’s impasse and that Pakistan did not intend to prematurely terminate the $6.5 billion deal.
One condition under the IMF’s Memorandum of Economic and Financial Policy (MEFP) relates to the Net International Reserves (NIR), which can only be satisfied after getting guarantees from friendly nations to bridge a balance of payment gap.
By the end of June, Pakistan will increase its foreign exchange reserves to $10 billion, as promised to the IMF.
The IMF requests guarantees from the nation for up to $7 billion to cover the balance of payments imbalance for this fiscal year.
