According to a local news channel, which cited the State Bank of Pakistan, China sent Pakistan $1 billion to help with the country’s cash flow problems. In a short message to journalists, the central bank announced, “This is to inform you that USD 1 billion has been received from China.”
The payment from China was a glimmer of hope while the government waited for a bailout financing from the International Monetary Fund. Finance Minister Ishaq Dar recently stated that China will refinance USD 1.30 billion that was paid to settle a Chinese loan today or Monday, in response to questions over the country’s dwindling foreign reserves.
According to the News, Ishaq Dar said, “SBP will receive USD 1.30 billion from China today or Monday,” and further stated that negotiations for a USD 2 billion dollar swap were also underway with Beijing.
The economy of Pakistan is in disarray as a result of mounting financial problems and the postponement of an agreement with the IMF that would release much needed cash.
Pakistan’s political instability is making it difficult for the country to attract foreign investment.
The International Monetary Fund has already voiced its displeasure with Pakistan’s latest budget proposal. Currency reserves in Pakistan are hardly enough to pay imports for one month. As reported by Dawn, the country had intended to get USD 1.1 billion of the cash in November, but the IMF has insisted on a number of conditions before it makes any further payouts.
While Dar did hold multiple meetings, he was unable to persuade senior IMF officials to finish the 9th review, which is required to obtain a staff-level agreement and release the USD 1.1 billion tranche. Pakistan has only two weeks left to strike an agreement with the IMF, or else the country’s economy will suffer severe consequences. Dawn said that the deadline for the rescue plan was set for June 30.
With record inflation, fiscal imbalances, and low reserves, Pakistan is trying to strike an agreement with the lender as the country’s IMF programme expires this month. More than USD 2.5 billion in funding has yet to be disbursed.
The government hopes that general elections in November would end the uncertainty caused by protests spearheaded by the Pakistan Tehreek-e-Insaf (PTI) chairman, who was removed from office after a vote of no confidence last year. The distribution of USD 1.1 billion of a USD 6.5 billion package has been held up since November pending an IMF staff agreement.
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