Pakistan has secured commitments from China, Saudi Arabia and the United Arab Emirates to roll over debt for a year, a boost for the government as it awaits final approval of a new $7 billion loan programme with the International Monetary Fund (IMF), Bloomberg reported on Tuesday.
Pakistan has a peculiar financial arrangement with these three countries in the shape of commercial loans and SAFE deposits that are rolled over every year and form a major part of the IMF programme in terms of external financing needs.
Pakistan has now requested the maturity period of these loans — $5bn from China, $4bn from Saudi Arabia, and $3bn from the UAE — to be extended to at least three years, offering greater predictability under the IMF programme.
Bloomberg said Finance Minister Muhammad Aurangzeb told reporters in Islamabad after a parliamentary committee meeting that the volume of rollovers would be the same as last year, adding that the country has $12bn in bilateral loans that have been extended for the past few years.
The federal government and the International Monetary Fund reached an agreement for a 37-month loan programme in July. Pakistan has relied heavily on IMF programmes for years, at times nearing the brink of sovereign default and having to turn to countries such as the UAE and Saudi Arabia to provide it with financing to meet external financing targets set by the IMF.
Bloomberg reported that Aurangzeb said the government expected to manage a financing gap of as much as $5bn during the fund’s three-year programme.
The IMF in its statement following the staff-level agreement said the new Extended Fund Facility programme was subject to approval from its executive board and obtaining “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners”.
The finance ministry did not immediately respond to a Reuters’ request for comment.
Last week, Prime Minister Shehbaz Sharif said he had written a letter to the Chinese government requesting debt reprofiling for Pakistan.