ISLAMABAD: Pakistan on Friday received $500 million from the Commercial and Industrial Bank of China as part of the $1.3 billion facility.
Federal Finance Minister Ishaq Dar announced the development on his Twitter handle. Dar wrote: “State Bank of Pakistan (SBP) has received $500 million in its account today from Chinese Bank. It will increase the forex reserves of Pakistan. AlhamdoLilah!”
State Bank of Pakistan has received today in its account from Chinese Bank ICBC US $ 500 million. It will shore up forex reserves of Pakistan.
AlhamdoLilah! https://t.co/dIHmfBLlvD— Ishaq Dar (@MIshaqDar50) March 17, 2023
The second critical disbursement from the Chinese bank came after Pakistan completed the necessary documentation.
Out of #Chinese ICBC’s approved rollover facility of US$1.3 billion (which was earlier repaid by Pakistan to ICBC in recent months), documentation for second disbursement of US$500 million has been completed by Finance Ministry for release of funds to the State Bank of Pakistan!
— Ishaq Dar (@MIshaqDar50) March 16, 2023
Earlier this month, the Chinese bank had approved to rollover of a $1.3 billion loan for Pakistan.
On March 4, the Chinese bank deposited $500 million as the first disbursement, which helped the country’s foreign exchange reserves surpass the $4 billion mark.
The cash-strapped Pakistan has faced growing economic challenges, with sliding forex reserves, high inflation, a widening current account deficit, and a depreciating local currency.
Chinese bank to provide $1.3 billion
Earlier in September last year, Ishaq Dar said that Pakistan had made payments of about $5.5 billion (excluding the $1 billion sukuk payment). These payments include $2 billion to China Development Bank and ICBC, and $3.5 billion has been given to other countries’ banks.
Ishaq Dar said that debt is usually rolled over; however, the debt stock does not reduce. “We are reducing debt stock,” Dar had said. “Formalities with the Chinese bank were completed last night. We returned $1.3 billion to the ICBC, and this facility has been renewed, and now we will receive the amount in three tranches.”
“We paid $1.3 billion in three tranches of $500 million each in the first two tranches and $300 million in the last tranche. Pakistan will receive $500 million in the coming two-three days. We might receive it on Monday. Then we will receive an additional $500 million in the next 10 days.”
As of March 10, foreign exchange reserves were at $4.3 billion, just enough for less than a month of imports. At the same time, the liquid foreign exchange reserves stand at about $9.8 billion, which includes $5.5 billion in net reserves held by local commercial banks.
A Chinese bank had assurances it would provide another refinanced $500 million loan within the coming few days, bringing the total commercial loans up to $1.7 billion.
Now Pakistani authorities are anxiously awaiting confirmation from the Kingdom of Saudi Arabia (KSA), Qatar, and the UAE, as well as from the World Bank (WB) and the AIIB, for fulfilling their external financing needs of $6 billion until the end of June 2023.
