By Muhammad Luqman
Facing all-time high trade and current deficits, Pakistan received loans worth $439 million July to shore up its foreign exchange reserves in addition to $2-billion one-off Chinese injection.
About two-thirds of the total loans have been received from China against four projects, according to data available with Ministry of Finance and Economic Affairs. The Chinese project financing is expected to slow down in the coming months due to completion of ongoing schemes.
China disbursed $290 million in July. This amount includes $166 million for the Orange Line Metro Project, $95 million for the Sukkur-Multan section of China-Pakistan Economic Corridor’s (CPEC) eastern route, and $22 million for Havelian-Thakot road of CPEC. All these three schemes are near completion.
Yao Jing, the Ambassador of People’s Republic of China, met with Pakistan’s Finance Minister Asad Umar on Monday. The ambassador, according to finance ministry statement, said that he looked forward to working closely with Pakistan with a view to further increase the economic cooperation between the two countries.
Pakistan expects continued Chinese financial assistance to deal with the current economic crisis, as reliance on the International Monetary Fund (IMF) may make things complicated for both Islamabad and Beijing, the officials believe.
Pakistan also received $70 million worth of two commercial loans from Noor Bank PJSC and consortium-led by Suisse AG. Both of these loans have been obtained for one year at the floating London Interbank Offered Rates. Noor Bank disbursed $20 million in July out of total committed amount of $130 million.
The Suisse AG also disbursed $50 million out of its total commitment of $750 million. Both of these loans will mature within this fiscal year, increasing the refinancing risks for the country at a time when it is already facing pressure on its external sector.
Pakistan’s gross external financing needs are assessed at a minimum $26 to $28 billion, depending upon the projected current account deficit.
Pakistan booked $2.2 billion current account deficit in July, which was 16% higher than the already higher base. But authorities believe that the trend will reverse in the coming months, as July’s current account deficit widened due to clearance of some pending import dues.
The loan disbursements by multilateral creditors remained low in July, as the country received only $48 million from multilateral lenders. The Asian Development Bank (ADB) disbursed $23.3 million. The World Bank also released $23.1 million last month.