- The rollover adds to the foreign exchange reserves of the cash-strapped country.
- The Prime Minister said, economic indicators are improving with the help of friendly countries.
- China’s Exim Bank is the latest institution to repay Pakistan’s debt.
Prime Minister Shehbaz Sharif said on Tuesday that a Chinese bank extended a $600 million loan to Pakistan, boosting the cash-strapped country’s foreign exchange reserves.
The Prime Minister was addressing the launch event of the Prime Minister’s Youth Sports Initiative in Islamabad, where he announced to allocate more funds for youth development if voted to power again.
PM Shehbaz Sharif said, “Yesterday, China’s Exim Bank lent Pakistan an amount of over $600 million, thereby increasing our foreign exchange reserves.” He said that economic indicators are improving with the help of friendly countries.
However, he did not specify when this payment would be due.
The country is showing signs of economic stability after the International Monetary Fund (IMF) approved a $3 billion bailout program and transferred the first tranche of $1.2 billion under a nine-month stand-by arrangement.
After teetering on the brink of sovereign debt default, Pakistan earlier this month received $1 billion from the United Arab Emirates and $2 billion from Saudi Arabia, as both were reassured by an agreement between Islamabad and the IMF in late June.
The State Bank of Pakistan said last Thursday that Pakistan’s foreign exchange reserves with the central bank increased marginally by $61 million to $4.524 billion in the week ended July 7.
An IMF statement said the bailout program would focus on an appropriately tight monetary policy aimed at preventing price pressures in the South Asian country of 220 million people.
The IMF expects inflation to average 25.9% in fiscal year 2024, although it expects a substantial reduction to around 16% by the end of that period.
With the key policy rate at 22%, the government has projected inflation to be 21% for FY2024.
“Going forward, a sustained tight, proactive and data-driven monetary policy is needed,” the IMF statement said.
The battered Pakistani economy is facing a severe balance of payments crisis and the central bank has enough reserves to cover barely a month of controlled imports. The IMF estimates that it will have an import cover of 1.4 months in FY24.
The IMF deal, a lifeline for Pakistan after teetering on the brink of default, came after eight months of tough negotiations on fiscal discipline.
“A market-determined exchange rate is also important for cushioning external shocks, reducing external imbalances, and restoring growth, competitiveness, and buffers,” the IMF said.