The economy seems to have scored approximately $9 billion from China and a little over $4 billion from Saudi Arabia, in addition to an assurance of investment worth $20 billion.
Ishaq Dar, the finance minister of Pakistan, on Friday, 4th October, connoted that cash-strapped Islamabad has secured a $13 billion financial support package from long-established allies China and Saudi Arabia in an attempt to steady a frail economy. The economy seems to have scored approximately $9 billion from China and a little over $4 billion from Saudi Arabia, in addition to an assurance of investment worth $20 billion.
“They promised the security of financial support,” Mr Dar quoted Chinese President Xi Jinping, who vouched by saying, “don’t worry, we will not let you down.”
The Prime Minister of Pakistan, Shehbaz Sharif, had recently made his rounds to Beijing. During his tour, the Mainland vowed a rollover of $4 billion in the form of sovereign loans, an attempt to refinance $3.3 billion commercial bank loans, and an increase in currency swap by $1.45 billion (from 30bn yuan to 40bn yuan. All of it rounds up to $8.75 billion for this financial year. China also promised to jack up oil facilities on deferred payments in line with the International Monetary Fund (IMF) agreement. The two nations have also promised to attend to Islamabad’s financial requirements till June 2023.
The generous financial packages are an attempt to ease Pakistan’s suffocating economy. Sharif’s visit to Saudi Arabia has brought forward a handsome assurance to positively adjudicate Pakistan’s request for an additional $3bn in deposits as well as jacking up oil facilities on deferred payments by an extra $1.2bn. Another additional amount of $4.2bn will be set in for consideration by the Saudi dominion.
“China and Saudi Arabia have given assurances to Pakistani delegations under Prime Minister Shehbaz Sharif during recent visits that they will take care of Islamabad’s financial requirements till June 2023. Now the real effective exchange rate (REER) in terms of rupee against the US dollar has come down to Rs190 against the US dollar, and no one will be allowed to play with our exchange rate,” said Dar.
The finance minister also mentioned China’s willingness to expedite the processing of the $9.8bn Karachi to Peshawar high-speed rail project. An official added that both sides expect the bidding to be undertaken by December 2022, and financial negotiations on terms and conditions will succeed in the bidder selection. Dar had suggested a part of the outstanding dues to the power producers of the Mainland be converted into debt stocks as Rs 166bn had already been repaid in the past months.
Saudi Arabia has agreed to revive the $10-12bn petrochemical refining project at Gwadar. Pakistan is also attempting to engage Saudi in privatizing transactions in LNG power projects and shares in other entities so as to ensure non-debt creating foreign inflows.
Foreign exchange reserves of Pakistan held by the State Bank of Pakistan surged to $8.91 billion at the end of October. The total reserves stand at $14.68 billion, with $5.77 billion held by commercial banks.
The stock market of Pakistan, following the minister’s statement on Friday, opened with a positive blast on Monday. The benchmark KSE-100 index began to gain almost immediately as trading resumed, hailing an intraday high of 351.11 points around 10 am. Stocks gained about 191 points after news of the expected ally deal floated on the market.
Later in the day, the market reversed some gains settling at 42,047.36 points, or a 0.46 per cent increase from Friday. Experts believe that the dollar is expected to come below Rs 200 soon. The support from the two governments shall help stabilise Pakistan’s balance of payment position. There is an expectation of better performance by the market henceforth.