Highlights:
- Pakistan receives a $2.3 billion loan facility from a Chinese consortium of banks
- The inflows are expected in the coming days.
On June 22, 2022, Finance Minister Miftah Ismail confirmed the $2.3 billion loan facility agreement from a Chinese consortium of banks. Pakistan signed the agreement a day earlier and the cash flows are expected in the coming days.
Finance Minister Miftah Ismail expressed his gratitude to the Chinese government for facilitating the transaction.
On this occasion, Foreign Minister Bilawal Bhutto also expressed his joy and thanked the Chinese government as well as the people of China.
Agreement with China – A Relief for Pakistan
The agreement has come as a relief and a ray of hope for economic policymakers. The foreign exchange reserves fell below $9 billion as of June 10, (held by the State Bank of Pakistan). The level stayed at less than six weeks of import cover.
The funds from China are expected to bolster the country’s reserves and allow it to make import payments.
The aid by China will also lend support to the rupee which has been experiencing a downfall since the start of the outgoing fiscal year 2021-22.
The Financial Future Ahead
Finance Minister Miftah Ismail said that Pakistan requires a gross of $41 billion in foreign loans in the next fiscal year.
The country needs to finance a $16 billion current account deficit, repay $21 billion in maturing loans, and receive additional funds to improve reserves.
Currently, talks with the IMF are in progress and if the IMF program is restored we can hope for a better financial future for the country.
