Pakistan Seals $2 Billion Loan From China Amid IMF Delay
Pakistan expects to receive a $1.3 billion loan rollover from Industrial and Commercial Bank of China.
(Bloomberg) -- Pakistan expects to receive a $1.3 billion loan rollover from Industrial and Commercial Bank of China, taking the total relief to $2 billion for the nation that is seen at risk of a default.
ICBC has approved the rollover of existing debt and actual inflows will happen in three tranches with $500 million in the next few days, Finance Minister Ishaq Dar said at a briefing in Islamabad Friday. The move follows a $700 million loan by China Development Bank earlier this week.
The funds will provide a much needed relief for the nation that has about $7 billion of repayments in the coming months. Pakistan’s dollar bonds due next year slid to the lowest since November on Thursday as investors remained concerned on its ability to make good on its payment obligations amid a dollar crunch.
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“China has made a great show of friendship,” Dar said, adding that the nation is in a “precarious” position, but it won’t default.
The nation’s foreign-exchange reserves will rise to more than $10 billion by June from less than one-month import cover of $3.8 billion, said Dar. Earlier this week, Moody’s Investors Service downgraded the nation deeper into junk citing fragile external position.
Authorities in Pakistan are relying on a bailout loan from the IMF to stave off a default, which has remained elusive so far. To win the lenders support, the South Asian nation has increased taxes, raised energy prices and allowed its currency to depreciate. It will raise electricity prices in the next 24 hours for next fiscal year, that is one of the two pending prior actions, Dar said without disclosing the second step.
China wants “concerted efforts of all parties” for Pakistan’s development, spokeswoman Mao Ning said at a regular press briefing in Beijing this week. Pakistan has seen multiple delays in its loan program with the IMF but now it expects to reach an agreement by next week. It has failed to meet multiple such deadlines in the past.
(Updates with details throughout)
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