Pakistan, China sign $2.3bn loan agreement: Miftah

ISLAMABAD: Pakistan and a Chinese consortium of banks have signed a RMB 15 billion ($2.3 billion) loan facility agreement, announced Finance Minister Miftah Ismail, here on Wednesday.

The Chinese consortium signed the agreement on Wednesday after it was signed by the Pakistani side a day earlier, Ismail tweeted, adding: “Inflow is expected within a couple of days. We thank the Chinese government for facilitating this transaction.”

It comes a day after Pakistan reached a broad understanding with the International Monetary Fund (IMF) on the budget 2022-23 for revising tax revenue target and slashing expenditures for the revival of $6 billion loan programme. Tax revenue target would be reportedly increased from Rs7,004 billion to Rs7,442 billion for the next fiscal, whereas the expenditure target to be revised down in order to achieve revenue surplus of Rs152 billion.

The development helped rupee regain a little ground against dollar in early morning interbank trade after persisting decline. But the momentum proved short-lived as the local currency closed at Rs211.93 against US dollar after shedding 0.21 per cent value in interbank market.

However, the agreement with Chinese banks is expected to bolster the country’s reserves and enable it to make import payments while lending some support to the rupee as well which has lost over 34 per cent since the start of the outgoing fiscal year 2021-22.

It comes as a massive relief to economic policymakers after foreign exchange reserves held by the State Bank of Pakistan (SBP) fell below $9 billion as of June 10.

The news came as a lifeline with the country already facing an uncertain economic situation as it remains engaged in talks with the IMF over the revival of a stalled Extended Fund Facility. On Tuesday night, Pakistan and the IMF evolved a broader agreement on the budget for the fiscal year 2022-23 to revise upward the Federal Board of Revenue (FBR) target and slash expenditures to achieve a revenue surplus in the next fiscal year.

IMF’s Resident Representative to Pakistan Esther Perez Ruiz later said discussions between the IMF and Pakistan were underway and major progress had been made regarding the budget for the next fiscal year.

Earlier this month, Ismail had announced Chinese banks had agreed to refinance Pakistan with $2.3 billion worth of funds which would “shore up Pakistan’s foreign exchange reserves”. Taking to his

Twitter handle, Miftah had written: “Good news. The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about $2.3 billion) have been agreed.”