Documentation of second disbursement from Chinese ICBC completed: Dar

Federal Minister for Finance and Revenue Ishaq Dar on Thursday revealed that the documents for the second disbursement of $500 million from the Industrial and Commercial Bank of China (ICBC) have been completed.

Earlier this month, ICBC approved a $1.3 billion loan rollover for cash-strapped Pakistan, which was expected to boost its dwindling foreign exchange reserves.

After the announcement, 500 million dollars deposited in a Chinese bank. on March 4 which also helped foreign exchange reserves cross $4 billion.

“Out of the $1.3 billion approved rollover facility of Chinese ICBC (previously paid by Pakistan to ICBC in recent months), $500 million has been released by the Ministry of Finance to the State Bank of Pakistan. The documents for the second disbursement have been completed, the Finance Minister announced today.

The cash-strapped country faces mounting economic challenges, including inflation, declining foreign exchange reserves, widening current account deficits and currency devaluation.

Earlier, Dar – who took charge of the finance ministry in September last year – said Pakistan had repaid around $5.5 billion (excluding the $1 billion sukuk payment). Of these, $2 billion has been given to China Development Bank and ICBC and $3.5 billion to banks in other countries.

“Normally the debt is written off but the debt stock is not reduced. We are reducing the debt stock,” he had said. “The formalities with ICBC were completed last night. We have returned $1.3 billion to it and the facility has been renewed and we will get the money back in three instalments.”

“We returned $1.3 billion in three installments — $500 million, $500 million and $300 million. We will return it in the same way. Pakistan will get $500 million in two-three days. We may get it on Monday. . Then we’ll get it. An extra $500 million in 10 days.”

Foreign exchange reserves As of March 10, it was $4.3 billion, enough for less than a month of imports. While liquid foreign exchange reserves are around $9.8 billion, which includes net reserves of $5.5 billion held by commercial banks.

A report published in News A Chinese bank is said to have assured to provide another $500 million in loans in the next few days, bringing the total amount of commercial loans to $1.7 billion out of $2 billion.

Pakistani officials are racing from pillar to post to get 100% confirmation from friendly donors and multilateral lenders before moving towards a staff-level agreement with the International Monetary Fund (IMF).

It was an unwritten condition of the IMF that Pakistan would have to refinance trade loans as well as receive deposits from China during the period of the rollover program, which is set to expire in June 2023.

A senior Finance Division official confirmed on Wednesday and added that another $500 million commercial loan is coming from a Chinese bank and said it will be done soon.

Chinese banks have already refinanced $1.2 billion in commercial loans over the past few weeks, and now Beijing has assured another $500 million in debt refinancing over the next few days.

It is to be mentioned that Pakistan had also requested to roll over the Chinese safe deposit of 2 billion dollars within this month.

All these, refinancing of trade loans and rollover on safe deposits, are preconditions for the signing of a staff-level agreement between the IMF and the Pakistani side.

Now, Pakistani authorities are anxiously waiting for Saudi Arabia, the United Arab Emirates and Qatar, as well as the World Bank and AIIB, to meet their $6 billion external financing needs by the end of June 2023.