China assists Pakistan with $2.2 bn for dwindling forex reserves, move to help Islamabad avert possible default on external debts

Islamabad/Karachi: China on Monday pumped in $2.2 billion to cash-strapped Pakistan to shore up its close ally’s foreign currency reserves and help avert a possible default on external debt payments. With the generous Chinese assistance, Pakistan has so far received a total of $9.1 billion in financial assistance packages from friendly countries during the current fiscal year, The Express Tribune reported. While China has pumped-in $4.1 billion, Pakistan has got $3 billion from Saudi Arabia and $2 billion from the United Arab Emirates (UAE), it said. [caption id=“attachment_5507591” align=“alignleft” width=“380”] File photo of Imran Khan and Li Keqiang. Reuters[/caption] “The State Bank of Pakistan has received RMB 15 billion value equivalent to $2.2 billion as proceeds of the loan obtained by the government of Pakistan from China,” the central bank tweeted. Finance Ministry spokesperson Khaqan Hassan Najeeb said the funds deposited in the State Bank of Pakistan would strengthen the stability of the country. The SBP’s reserves stood at $8.84 billion as on 15 March, 2019, according to the central bank’s latest weekly report. The latest deposits came from Beijing are expected to boost the SBP’S reserves into double digit after a gap of almost one year, the report said. The comparatively higher imports than exports and debt repayments did not allow the reserves to stay stable, as the government was partially financing such international payments using the reserves. Apart from the financial help, Riyadh has also enabled a $3 billion petroleum oil supply line on deferred payment for Pakistan as well. Finance Minister Asad Umar has estimated a financing gap of around $12 billion for the ongoing fiscal year 2019 and another $7-8 billion for the fiscal year 2020, the report said. The friendly countries have extended the soft loan at an interest rate ranging 2.5-5 percent to shore up SBP’s foreign currency reserves and averting payment default. Pakistan is also negotiating with the International Monetary Fund for an aid package but talks have been inconclusive, media reports said. Earlier, the UAE had announced a $6 billion package for Pakistan in December 2018 including $3 billion in cash deposit and a credit line of another $3 billion for the supply of petroleum on deferred payment. However, Pakistan has not been able to secure the $3.2 billion oil on deferred payments facility from the UAE. “The deposits are coming at a very critical time as Islamabad is set to make a large external debt payment next month — April, while its reserves remain under pressure,” Arif Habib Limited Head of Research Samiullah Tariq said recently. “Pakistan is scheduled to pay off $1 billion for a maturing Eurobond in April.. this will be in addition to other external debt payments during the month,” he said. The increased international payment pressure led to depletion of Pakistan’s foreign currency reserves to almost five-year low at $6.63 billion as on 18 January, 2019.