Pakistan has sought financial support of about $21 billion from China through rollover of existing loans of $ 10.735 billion and $ 10 billion as deposit fund, to meet future financial needs and deal with financial challenges, well informed sources in Finance Ministry told Business Recorder.
Sharing the details, the sources said, several agenda items came under discussion during the Prime Minister’s visit to China, including those submitted by the Ministry of Finance that included rollover of all financing facilities’ (SAFE deposits of $4.0 billion and commercial loans of $6.735 billion) upon maturity - one SAFE deposit of $2.0 billion is maturing on March 23, 2022. A rollover request has already been made, duly signed by the Prime Minister in January 2022. Likewise, a 3-year commercial loan of RMB 15 billion equivalent to $2.235 billion from a consortium of CDB, BOC and ICBC is maturing on March 25, 2022.
The sources said, Ministry of Finance has been in contact with CDB for its refinancing, and a formal request on January 27, 2022 has also been sent. Other deposits and commercial loans will be maturing at later dates.
According to the sources, Pakistan has also requested for provision of a deposit fund of $10 billion. In addition, State Bank of Pakistan has proposed enhancement of currency swap arrangement to $15 billion.
The sources maintained that the International Monetary Fund (IMF) had allocated additional SDRs to its member countries in August 2021 with the aim to help them fight the pandemic. China’s share in the allocation came to SDR 29.22 billion. Ministry of Finance has requested Chinese concurrence for the use of a portion of its share either bilaterally or through a mechanism put in place by the IMF.
The sources further stated that the Government of Pakistan has re-negotiated Power Purchase Agreements (PPAs) with IPPs, other than CPEC-IPPs. This re-negotiation has resulted in substantial reduction in cost of energy from those IPPs. Similar negotiation with CPEC-IPPs is intended and it is estimated that the cost of energy from CPEC-IPPs will reduce by $14.29 billion over the life period of these IPPs. However, informal discussions with Chinese Embassy Islamabad show that Chinese Government is willing to offset this excess $14.29 billion through any means other than re-opening of PPAs with the CPEC-IPPs.
The sources said, State Bank Pakistan has proposed a road show in China to solicit interest of Chinese investors/ sponsors/ entrepreneurs for establishment of digital banks in Pakistan.
On cooperation regarding Central Bank Digital Currency (CBDC), State Bank of Pakistan has proposed a dialogue between the People’s Bank of China and SBP to help Pakistan better evaluate risks associated with CBDCs.
In a follow-up meeting chaired by the Prime Minister on February 11, 2022, Governor SBP requested assistance of the Ministry of Foreign Affairs for arranging a meeting between the Governors of the Central Banks of the two countries to discuss the submitted proposals.
The Ministry of Finance, the sources said, has directed Pakistan ambassador to China, Moin ul Haque to follow the three proposals with the relevant Chinese authorities, with are related to Pakistan’s external account stability and budgetary needs.
The ambassador has also been directed to extend assistance for arranging a meeting between the governors of Central Banks of the two countries to discuss proposals.
Meanwhile, a ministerial-level delegation from China is planning to visit Pakistan in connection with the forthcoming 48th meeting of the OIC Council of Foreign Ministers on 22-23 Much 2022. The Chinese delegation would also have a number of bilateral engagements with their Pakistani counterparts.
The story was originally published in Business Recorder on March 8, 2022.