Pakistan to seek $3-4bn from allied states

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As per Plan B, Pakistan is set to approach friendly nations for financial support amounting to $3-4 billion. This course of action came in light of the potential impasse with the International Monetary Fund (IMF) until the end of June 2023. The Ministry of Finance is considering various options to secure financing from bilateral partners to prevent an impending crisis in its external accounts if the ninth review is not concluded.

It is important to note that the IMF program is scheduled to expire on June 30, 2023. Despite both the IMF and Pakistan expressing their commitment to complete the ninth review under the $6.5 billion Extended Fund Facility (EFF) program, concerns have been raised publicly by both parties.

According to media reports, Pakistan is actively exploring the provision of additional deposits of $3-4 billion from its bilateral allies to meet its financial requirements. This arrangement is being seriously considered to avoid the risk of default in the coming months until October or November 2023.

However, it should be noted that friendly countries such as Saudi Arabia and the United Arab Emirates (UAE) have tied their additional deposits of $2 billion and $1 billion respectively to the signing of a staff-level agreement and the resumption of the IMF program.

An official stated that the request for additional deposits of $3 billion from bilateral allies is under consideration, and if successful, it will enable Islamabad to navigate the next few months without the fear of default.

Meanwhile, Finance Minister Ishaq Dar revealed that China has agreed to rollover $1 billion and refinance a $300 million commercial loan within the ongoing month. This would prevent a depletion of $2.3 billion from the foreign exchange reserves by the end of June 2023.

Minister Dar mentioned in a televised speech that Pakistan has already repaid $1 billion to China Development Bank as per their devised strategy, and an additional $300 million to the Bank of China before the due date, with the understanding that it would be refinanced promptly. He emphasized that no penalties would be charged by these Chinese banks.

Regarding the State Administration of Foreign Exchange (SAFE) deposits worth $1 billion, Dar stated that Pakistan is in the process of renewing two deposits of $500 million each within the ongoing month.

The minister assured that Pakistan would fulfill its predicted repayment of $3.7 billion as estimated by an international rating agency and emphasized that all repayments would be made on time. He added that there would be no significant reduction in the foreign exchange reserves held by the State Bank of Pakistan until June 30.

In regard to Shell Pakistan, Dar assured that the company plans to sell its shares to an international investor, ensuring the continuity of their business activities in the country. He emphasized that employees would remain unaffected, and no funds would be transferred out of the country. Dar mentioned that Shell’s decision to separate from the energy sector is an internal matter and should not cause concern.