Pakistan seeks yet another huge loan from China

Pakistan seeks yet another huge loan from China

ISLAMABAD: As Pakistan economic conditions deteriorate and reserves and currency on a fall the government is mulling option of yet another huge loan to stabilise the reserves.

The government is all set to secure commercial loan of $1 billion to $1.5 billion from Chinese banks within the next two weeks to shore up the depleting foreign currency reserves, senior officials said on Tuesday.

The country had already raised $1.77 billion short-term commercial loans from various foreign banks, mainly Chinese, against a target of $1 billion for the current fiscal year of 2017/18.

With the upcoming transaction, total short-term debt might go close to $3 billion mark.

“The planned short-term loan transactions would be meant for two to three years period and efforts would be made to keep the rates low,” the official said.

The government deferred a plan to tap Eurobond after its rate went up in recent weeks,” the official said.

Pakistan requires dollar inflows to manage its financing requirements in the wake of yawning current account deficit. The current account deficit is projected to go up to $16 billion in the current fiscal as it stood at $10.4 in the first seven months of the FY18.

“We have worked out that some non- debt inflows will pour in the remaining months of the outgoing fiscal year to check depletion of foreign currency reserves,” the official said.

“We expect that the foreign direct investment will touch $3 billion mark as it had already poured to the tune of $1.6 billion in first seven months.”

The official said the private sector credit in dollars will also bring sizeable inflows.

“The remaining gap will be bridged through short-term commercial borrowings from international banks,” he added.

“All requirements for obtaining loan in the range of $1 to $1.5 billion have been accomplished and it is hoped that this transaction will be done within first two weeks of next month (April 2018).”

The country had already obtained $7.6 billion from multilateral and bilateral creditors in the current fiscal year but the foreign currency reserves held by the State Bank of Pakistan (SBP) continued to decline and fell to $11.8 billion.

Pakistan requires an immediate injection of $6 billion to $8 billion to keeping its foreign currency reserves afloat otherwise rapidly depleting reserves could deepen the crisis in coming months.

“The government has also planned amnesty scheme for nonresident Pakistanis to bring back at least $4 billion to $5 billion,” another finance ministry official said. “Whether it becomes successful in achieving the desired objective is yet to see.”