ISLAMABAD: As one of the prior actions to qualify for IMF loan of $6 billion, Pakistan has been asked to get commitments from China, UAE and Kingdom of Saudi Arabia (KSA) that they would roll over their credit lines and to this effect the financial managers of PTI government in Finance Ministry are on toes to attain the commitments from the said countries, a well-placed official in one of the economic ministries loans has told The News.
“As desired by IMF, we have started working to ensure that the written commitments are be submitted to the Fund, from friendly countries ensuring the roller over of their loans extended to Pakistan which are due to be paid in next financial year,” the official source said.
Interestingly, IMF is not ready to roll over its own loan for Pakistan, but it is asking the country’s financial managers to have commitment certificates from China, KSA and UAE to this effect. The official said that the Fund has never asked earlier for such a thing to any country, but in case of Pakistan this time it has included in these prior actions.
China’s loan stands at about $19 billion mainly in project financing and of it, $7 billion is from Chinese commercial banks and $4.2 billion are parked in the reserves. Saudi Arabia has given Pakistan $3 billion and UAE $2 billion for one year. “It is quite strange that IMF is not willing to accept that Pakistan owns the said loans and Fund’s demand is againstthe international norms and practices,” he said.
The official source said, “We hoped that friendly countries will fulfill their commitment for rollover of loans, but it will be an uphill task to get rollover of $7 billion loans that were arranged from Chinese commercial banks as banks usually show hesitance in extending the payback time lines.”
However, the senior official representing Finance Ministry said that the total debt profile of Pakistan needs to be restructured and the ministry is very much on it. He said that there are different types of loans that include multilateral, bilateral, project financing mode loans and commercial loans. ‘This is routine exercise to getting the rolled over of the loans. As far as commitment from friendly countries for rolling over of their loans, the Pakistan is in touch with the said countries at required level.’
The financial ministry official insisted saying that getting commitment from the friendly countries is not a prior action, but when asked it is clearly mentioned in the press release of IMF, he didn’t come up with the satisfactory answer. However, he said that for the short term loans due to be paid in next year will be rolled over and to this effect Pakistan is in touch with the said countries.
When asked if Prime Minister of Pakistan had taken up this issue with Chinese counterpart during second OBOR meeting, the official from Finance Ministry says that Pakistan’s Premier did not take up this issue and added that Imran Khan will not take up this issue too with top leadership of Saudi Arabia and UAE in the Gulf Cooperation Council and Arab League meetings to be held in May 30-31 at Makkah. However, he insisted that Finance Ministry has decided to deal with Pakistan debt profile to bridge the financing gap.
Dr Khaqan Najeeb, Advisor and Spokesperson Ministry of Finance, said refinancing of external debt is indeed a normal practice and government is cognizant of its external debt obligations and accordingly fresh disbursements are in place to repay its existing obligations or refinancing is ensured.
Dr Najeeb said in addition to ensure debt sustainability and have a diversified investor base over medium to long term, the government is planning to tap new international markets and will continue to seek long-term concessional financing from multilateral and bilateral development partners.
Accordingly, maturities of external public debt would be extended which will result in lower gross external financing requirements and enhance the debt sustainability of external public debt portfolio, said Dr Khaqan Najeeb.
Dr Najeeb clarified that the scheduled repayments are well within manageable level and as such there is no cause for concern with regard to refinancing/repayments of its external debt obligations.
(This news/article originally appeared in The News on May 20th, 2019)