SBP receives $700mn loan from Chinese bank

Web Desk 24th Feb, 2023. 09:54 pm

SBP has received $700 million financing from China Development Bank
The foreign reserves have reached close to $4 billion
Finance Minister Ishaq Dar announced the loan facility

KARACHI: State Bank of Pakistan (SBP) has received $700 million financing from China Development Bank (CDB).

Sources within the Finance Ministry said Pakistan has received the loan from the Chinese bank. The board of China Development Bank as approved the loan for Pakistan

The foreign reserves of the central bank have increased after the funds have been received and have reached close to $4 billion

Earlier this week, Finance Minister Ishaq Dar announced that the Board of China Development Bank has decided to lend support ad approved a $700 million facility for Pakistan.

He said the formalities have been completed and $700 million iss expected to reach the State Bank of Pakistan (SBP) by this week. He maintained that the loan will “shore up” Pakistan’s foreign exchange reserves.

“This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserve,” the finance minister said.

Earlier this month, the country’s foreign exchange reserves slipped to the alarming level of below $3 billion for the first time in nine years, reducing import capacity to slightly over two weeks.

Sources revealed the loan was in addition to other facilities that China has already extended to Pakistan. Pakistan is also hopeful that all matured loans from Chinese commercial banks would be re-financed soon.

Pakistan is eyeing to get re-financing of Chinese loans up to $2 billion by the end of February or the first week of March 2023.

Pakistan is stuck in a dire balance of payment crisis and needs to secure the $1 billion tranche under the $6.5 billion Extended Fund Facility from the International Monetary Fund (IMF).

The global lender is demanding that Pakistan needs to secure additional external financing avenues particularly from friendly country. The IMF is also demanding slapping additional power surcharges and hiking the policy rate from Pakistan.

Islamabad has agreed to implement the Memorandum of Economic and Financial Policies (MEFP), which contains policy suggestions by the IMF. The staff-level agreement is expected next week.