Dar wants to keep reserves at $4 billion.
The Finance Minister’s plan to make payments ahead of schedule is successful.
ISLAMABAD: After China quickly refinanced the $1.3 billion loans it immediately repaid this week, Finance Minister Ishaq Dar insisted on Saturday that Pakistan’s current roughly $4 billion in foreign exchange reserves will not significantly decline.
Dar announced the repayment of another $300 million in debt to China in a televised statement, anticipating that Beijing will refinance the sum within four or five days.
Despite having only $4 billion in cash on hand, Pakistan has repaid $1.3 billion in Chinese loans during the last five days.
The strategy of the finance minister to make the repayments ahead of schedule has assisted in keeping the reserves at their low level.
Dar reassured the country, “All the payments will be made on time, and there won’t be any significant change in the foreign exchange reserves position this month.”
With barely $4 billion in reserves, there were worries that Pakistan would struggle to pay the $3.6 billion debt in June.
The expected external debt repayments, including interest expenditures, for the upcoming fiscal year come to about $25 billion.
Pakistan has unable to get a new bilateral loan, despite budgeting $3 billion in new loans from Saudi Arabia and the United Arab Emirates for the upcoming fiscal year.
Additionally, it has allocated $1.5 billion for Eurobonds, but the deals are contingent on gaining a positive economic health certificate from the International Monetary Fund (IMF).
The conditions for entering the international capital markets are a stable environment for interest rates worldwide and an increase in Pakistan’s credit ratings.
Pakistan’s central bank reported receiving a $1 billion loan from China on Friday, restoring the nation’s foreign exchange reserves to more than $4 billion.
As part of a debt management strategy to find refinancing well before the end of the fiscal year, the loan was paid off before the original due date of June 29.
Dar reported that China had eliminated the penalties for early debt repayment.
On Monday, Pakistan paid $1 billion to the China Development Bank (CDB).
Likewise, the finance minister reported that a second $300 million Bank of China obligation that was due on June 26 had been settled on Friday.
The $1 billion State Administration of Foreign Exchange loan was also renewed, the minister continued.
The government has been working to prevent the impending default, but on Saturday, it suffered a new blow when the PPP tied its support for the revised budget to additional funding.
The IMF had already requested that Pakistan review its budget and bring it into compliance with a responsible fiscal strategy when the PPP brought up the proposal.
The PPP’s chairman and foreign minister, Bilawal Bhutto-Zardari, said, “There was little input from the PPP in the new budget and I have sent a high-level committee to the prime minister.”
Bilawal continued by saying that the Centre had pledged to the international and provincial governments that it would match the money given to aid the flood victims of the previous year.
He proceeded by saying that the PPP had spoken with its partners to make them aware of the importance of including funding for flood victims in their budgets.
“Since the PM saw the destruction firsthand, we are confident in his intentions. The PPP chairman said, “We would like to invite the prime minister to reflect inside his team and hold anyone impeding this process accountable.
If the PPP’s demands were not met, Bilawal stated that the party would not support the budget in the National Assembly.
The budget is being discussed in the NA right now, and the administration needs it approved by June 23.
Shehbaz Sharif, the prime minister, has a precariously thin majority in the NA, and the departure of one tiny coalition member might topple his administration.
The administration has provided a bloated Rs950 billion federal Public Sector Development Programme (PSDP) for the upcoming fiscal year in order to placate the allies.
A further increase in this ratio will have further detrimental effects on the ongoing projects because it has already allocated nearly half of the entire PSDP for new plans.
