ISLAMABAD- Pakistan has contracted another foreign commercial loan of USD500 million from the Industrial and Commercial Bank of China (ICBC) toshore up its depleting reserves.
The Express Tribune reported that the with new borrowing the Chinesefinancial institution’s contribution to supporting a strong rupee againstthe US dollar increased to USD 1 billion in just three months.
It further reported quoting sources in the finance ministry that thegovernment contracted the loan on January 15 at a rate in the range of 4.5per cent.
In January, the country took a total of $704 million worth of new loans,taking foreign borrowings to $6.6 billion in just seven months of thisfiscal year, sources said.
The foreign loans were equal to 86 per cent of the annual budgetaryestimates that parliament had approved in June last year. This suggeststhat foreign loans for the second consecutive year may cross $10 billion.
China was the single largest lender that gave a total of $1.6 billion,which was equal to one-fourth of the total foreign loans Pakistan hasreceived in the last seven months.
Beijing also gave roughly USD 610 million for project financing during thefirst seven months.
In terms of source, sovereign bonds were the single largest source afterIslamabad raised USD 2.5 billion in November, which contributed roughly 38per cent to total foreign loans.
It was the second loan that the ICBC has given to Pakistan to support itsdiminishing foreign currency reserves, which are largely used to defend astrong rupee and finance the trade deficit. The ICBC had also given USD 500million in October last year.
Sources in the State Bank of Pakistan said that it was still intervening inthe exchange market to keep the dollar-rupee parity at current level.
In December, the central bank let the rupee depreciate by 5.2 per centagainst the US dollar. But it was still far less than the InternationalMonetary Fund’s assessment of the real value of the rupee.
With fresh foreign loans, the total foreign commercial borrowings in thefirst seven months of this fiscal year have increased to USD 1.8 billion,said the sources. The finance ministry had informed parliament in June lastyear that it would obtain USD 1 billion as commercial loans during 2017-18that will end on June 30. However, it has already breached the limit withfive months remaining.
So far, Citibank has given USD 267 million, Credit Suisse AG loaned USD 255million, Standard Chartered Bank London USD 200 million and Dubai Bank USD55.9 million. The share of foreign commercial banks in total loans stood at27 per cent.
The loans are obtained to stop the downward slide of the official foreigncurrency reserves that currently stand at USD 12.8 billion even afterissuing USD 2.5 billion worth of sovereign bonds in November.
The ministry is trying in vain to stop the reserves from slipping below thetwo-and-a-half-month import bill cover, which at current value of theimport bill stands at USD 12.3 billion.
Official foreign currency reserves have depleted by USD 3.5 billion sinceJuly. The current account deficit during the first half of the fiscal yearwidened to over USD 7.5 billion.
Pakistan’s total external debt and liabilities as of December 2017 stood atUSD 88.9 billion, higher by USD 5.8 billion or 6.9 per cent over six monthsago.
The main increase came by issuing sovereign bonds and taking expensivecommercial loans. In the first half, debt obligated by issuing NSukuk andEurobonds increased by 52 per cent to USD 7.3 billion.