China agrees to refinance Pakistan with $2.3 billion in funding (MF Ismail)

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China once again came to the aid of cash-strapped Pakistan as Finance Minister Miftah Ismail said on Thursday that Chinese banks had agreed to refinance his country with $2.3 billion in funds that will “strengthen foreign exchange reserves of Pakistan”.

“Terms and conditions for refinancing of 15 billion RMB deposit by Chinese banks (about $2.3 billion) have been agreed,” Finance Minister Miftah Ismail tweeted.

“The inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves,” he added.

Pakistan’s foreign exchange reserves are under severe pressure and fell by $190 million to $10.308 billion in the week ended May 6, according to the State Bank of Pakistan (SBP).

The country is heavily dependent on foreign loans, but they are not easy to obtain. Economic Affairs Ministry data earlier this month showed Pakistan received just $248 million in foreign loans in April, including $100 million in oil on deferred payments from Saudi Arabia.

Pakistan is turning to the International Monetary Fund (IMF) to reinstate a $6 billion package agreed in 2019. So far, half of the pledged money has been disbursed. Pakistan would immediately receive a $1 billion loan tranche from the IMF once the two sides settle their differences.

With the economy in tatters and political instability looming due to protests by former Prime Minister Imran Khan, there is a growing threat that Pakistan will follow the Sri Lankan path if swift action is not taken.

Before being ousted, Khan had asked Chinese Premier Li Keqiang to further refinance the RMB 15 billion loan that was extended to the country three years ago for a further three years under existing terms.

According to official sources, the country is expected to pay $20 billion to $21 billion in the next fiscal year starting July 1. It would also need about $15 billion more to close the trade deficit.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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