Pakistan receives another $300m from China

KARACHI: The country’s total liquid foreign exchange reserves fell by $515 million during the last week, mainly due to external debt servicing. However, Pakistan has received another inflow amounting to $ 300 million from China.

According to State Bank of Pakistan (SBP), the total liquid foreign exchange reserves held by the country stood at $ 8.864 billion as of June 16, 2023 compared to $ 9.378 billion on June 6, 2023.

During the week under review, the SBP’s foreign exchange reserves decreased by $ 482 million to $ 3.537 billion down from $ 4.0187 billion due to external debt payment. Similarly, net forex reserves held by commercial banks also declined by $32.6 million to reach $ 5.327 billion during the last week.

The country paid external debt worth $ 1.3 billion to China during the last two weeks, however as per commitment with Pakistan, China had refinanced it with Pakistan to build the sliding foreign exchange reserves and avoid default.

Chinese commercial loans worth $1.3 billion were due in June. As per schedule, Pakistan made debt repayment of $1 billion to the China Development Bank and $300 million to the Bank of China during the last two weeks.

On the request of Pakistan for the fast track refinancing of maturing commercial loans of $1.3 billion, China has refinanced it and out of total amount, some $ 1 billion was received during the last week, while $300 arrived during this week.

The SBP has also confirmed that it has received $ 300 million proceeds of government of Pakistan commercial loan. However, these inflows will be incorporated in the reserves position to be published as of Jun 23, 2023.

Chinese inflows will help build the country’s foreign exchange reserves but also meet the International Monetary Fund’s condition of $ 6 billion financing for release of the next loan tranche.

The government of Pakistan is continually making efforts for the release of IMF loan tranche worth $ 1 billion and Prime Minister Shehbaz Sharif met IMF Managing Director Georgieva, on the sidelines of the New Global Financing Pact Summit in Paris on Thursday and highlighted economic challenges. He also requested for the release of the Extended Fund Facility tranche.