ISLAMABAD: Pakistan on Friday said to have secured about $13 billion in additional financial support from two traditional friends — about $9bn from China and over $4bn from Saudi Arabia — on top of assurances for about $20bn investments.

Finance Minister Ishaq Dar told journalists that during Prime Minister Shehbaz Sharif’s recent visit to Beijing, the Chinese leadership promised to roll over $4bn in sovereign loans, refinance $3.3bn commercial bank loans and increase currency swap by about $1.45bn — from 30bn yuan to 40bn yuan. The total worked out at $8.75bn.

“They promised the security of financial support,” Mr Dar said and quoted Chinese President Xi Jinping as telling Mr Sharif to “don’t worry, we will not let you down”.

Mr Dar said the Pakistani delegation had four major engagements, including meeting with the Chinese president and the prime minister, and the chairman of the National People’s Congress, the country’s legislature.

These would be rolled over whenever they reach maturity, the minister said, adding that about $200 million worth of commercial loans had already flowed in a few days back.

Responding to a question, Mr Dar said the Chinese side had also agreed to fast-track the processing for a $9.8bn high-speed rail project (Main Line-1) from Karachi to Peshawar and both sides would immediately trigger their respective teams.

Another official said the two sides were hoping to arrange bidding for the project by December and negotiations for financing terms and conditions could follow once a bidder is selected.

Mr Dar said the Karachi Circular Railway (KCR) and Hyderabad-Karachi motorway projects were also taken up and the KCR would soon be in the implementation phase. The minister said he had also suggested a part of outstanding dues of Chinese power producers to be converted into overall debt stock and had already cleared about Rs160bn in recent months.

Responding to a question, he said Saudi Arabia had also “given a positive response” to Pakistan’s request for increasing its financing by another $3bn to $6bn and doubling its deferred oil facility of $1.2bn.

The two heads worked out at $4.2bn and the finance minister said there was no delay except a month or so of processing time.

Mr Dar said Saudi Arabia had also agreed to revive the $10-12bn petrochemical refining project at Gwadar, for which he had been assigned by the prime minister to coordinate with respective ministries for finalisation.

On top of that, the minister said Pakistan was engaging Saudi Arabia in privatisation transactions like in LNG power projects and shares in other entities to ensure non-debt creating foreign inflows.

Moreover, the minister said another $1.4bn worth of inflows were almost mature, including $500m from the Asian Infrastructure Investment Bank (AIIB) and two World Bank loans of $900m under the national harmonisation of general sales tax.

He said he had a positive meeting with the Sindh chief minister to harmonise GST and the financing envelope could be settled amicably. He noted that harmonising GST was important for World Bank inflows to arrive in the country.

On the exchange rate, the minister insisted that the rupee’s real effective exchange rate (REER) was around Rs194 per dollar, even lower than Rs200. He expected the stakeholders to also keep in mind the national interest instead of “just outrageous profitmaking”.

Pakistan had been engaging with China and Saudi Arabia for financial support, including rolling over maturing loans as part of arrangements for about $35bn putouts against debt and liabilities during the current fiscal year. The minister parried a question relating to the extension in debt repayments of Chinese independent power producers (IPPs).

As part of the 7th and 8th quarterly reviews of the International Monetary Fund, Pakistan and the IMF had estimated total external financing needs at about $33-34bn, but this did not include the requirements of flood damages.

The minister said the leadership of Beijing-based Asian Infrastructure Investment Bank (AIIB) had welcomed Pakistan’s announcement of not seeking Paris Club debt rescheduling, ensuring international bond payments on maturity and completing the ongoing IMF programme.

Last month, Mr Dar made it clear that Pakistan would rather seek to reschedule bilateral debt that now stands at around $27bn to secure greater breathing space in foreign loan repayments amid tight external account conditions.

“Rescheduling bilateral debt is fine,” he said at the time while ruling out the rescheduling of international debt from wealthy western nations under the Paris Club, multilateral and international sovereign bonds.

Talking to journalists on Monday, the minister said there was no point in Paris club rescheduling because the overall debt to these creditors was no more than 11pc of total foreign debt and debt relief over the year would be less than $1.2bn.

Paris Club creditor countries generally comprise Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland, the UK, and the United States, and together they owe about $10.7bn to Pakistan.

“When we are going to arrange $32-34bn for external payments, another $1.2bn is no big issue,” he said. These repayments involved about $22bn foreign debt servicing and about $10-12bn current account deficit.

Foreign exchange reserves held by the State Bank of Pakistan rose to $8.91bn during the week ended on Oct 28. The country’s total reserves now stand at $14.68bn, including $5.77bn held by commercial banks.

Published in Dawn, November 5th, 2022

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