Pakistan is currently in the process of rolling over a $2 billion Chinese loan that matured on March 23, according to an anonymous government source who spoke with Reuters. This is critical for the country’s foreign exchange reserves, which have dropped to just four weeks of import cover. Pakistan has been unable to secure bailout funding from the International Monetary Fund (IMF), which makes the rollover even more important. China has granted Pakistan a rollover of $2 billion in State Administration of Foreign Exchange (SAFE) deposits for one year, which helps the country meet one of the IMF’s requirements to move towards a staff-level agreement.
The rollover is a financial deposit to be kept at the central bank, not another Chinese loan. Pakistan’s finance ministry officials are hopeful that the country will receive financing from Saudi Arabia and the United Arab Emirates soon, as there is a looming threat of defaulting on external repayments. They also stated that a sum of $300 million is expected to be received from China this month, which will push the country’s foreign reserves beyond the $5 billion mark.
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One of the requirements under the IMF’s Memorandum of Economic and Financial Policies (MEFP) is related to the Net International Reserves (NIR), which can only be fulfilled after receiving assurances from friendly countries to fund a balance of payment gap. Pakistan has assured the IMF that it would raise its foreign exchange reserves to $10 billion by the end of June. The IMF is seeking assurances for up to $7 billion to fund this fiscal year’s balance of payments gap.
