No BoP support: 15 billion yuan loans being negotiated with China

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Pakistan is negotiating 15 billion yuan (approximately $ 2 billion) commercial loans with China after the latter refused to extend Balance of Payment (BoP) support during the recent visit of Prime Minister Imran Khan, well-informed sources told Business Recorder.

A technical team of Finance Ministry and the State Bank of Pakistan (SBP) recently visited China and discussed different modalities of loans and interest rate but the agreement has yet to be signed due to differences on interest rate and conditionalities, the sources added. Pakistan had sought $ 3 billion BoP support from China.

The Prime Minister has repeatedly stated that the package given by China is unprecedented whereas his Finance Minister, Asad Umar is on record saying that the balance of payment crisis is over, after the visit of the Prime Minister-led delegation to Saudi Arabia and China. However, on ground situation is far different from claims of Pakistani authorities.

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Soon after the Prime Minister”s high level visit, a technical team comprising Governor State Bank Pakistan, Tariq Bajwa and Secretary Finance, Arif Khan held discussions with the Chinese authorities in Beijing but the outcome of those negotiations remained fruitless. The meeting reportedly concluded in just 30 minutes with the Chinese official”s attitude “not friendly”.

Also Read: IMF not a permanent solution

An official on condition of anonymity told this scribe that “discussions are ongoing and progress is being made.”

Another official said that there is zero progress on market access with China which implies that there is no hope in the near future.

The sources said, Saudi Arabia has extended deferred oil facility for three years but UAE has not yet responded to Pakistan”s request of oil supply on deferred payment. Pakistan had sought similar facility from UAE as was extended by Saudi Arabia.

Another official told Business Recorder that the IMF Mission is expected to visit Pakistan mid of next month to finalise $ 8 billion program. The Mission is regularly exchanging communication with the Ministry of Finance.

The official further stated that the Fund”s Mission would hold three rounds for a new program, of which two have already been undertaken. The Mission also got briefings individually from the concerned ministries and organisations

He acknowledged that the Mission has sought further clarifications from the GoP on revenue yield initiatives, real time exchange rate, privatisation and curtailment of current expenditure.

The sources said, the IMF was satisfied with the performance of the power sector as its revenue has increased by Rs 13 billion within four months due to a combination of reduction in losses and improvement in recovery.

(This news/article originally appeared in Business Recorder on December 5th, 2018)

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