To assist the country’s cash-strapped economy in the aftermath of declining foreign exchange reserves and the depreciation of its native currency, Pakistan signed a credit facility agreement with a Chinese consortium of banks on Wednesday for 15 billion yuan (USD 2.3 billion).
Pakistan Finance Minister Miftah Ismail in a tweet said that the “Chinese consortium of banks has today (Wednesday) signed the RMB 15 billion (USD 2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday (Tuesday)”.
Thanking the Chinese government for “facilitating this transaction”, Ismail said the “inflow was expected within a couple of days”.
Foreign Minister Bilawal Bhutto-Zardari also expressed his gratitude to the Chinese leadership. “The people of Pakistan are grateful for the continued support of our all-weather friends,” he said.
The loan agreement with Chinese banks will help Pakistan, which is in the midst of a crisis, increase its reserves and allow Islamabad to pay for imports while also giving the currency some support.
Since the start of the current fiscal year 2021–2022, the Pakistani rupee has declined by more than 34%.
Economic officials are much relieved by the most recent trend after the State Bank of Pakistan’s (SBP) foreign exchange holdings dipped below USD 9 billion as of June 10 and remained at a level below six weeks’ worth of import coverage.
The agreement with China also coincided with news that Pakistan and the IMF had reached an agreement to restart the stalled USD 6 billion assistance package from the international community.
According to data from the central bank, it will also support Pakistan’s declining cash reserves, which are currently at USD 8.99 billion, the Dawn newspaper stated.
It is anticipated that the agreement with the IMF will open doors for funding from other international sources.
Pakistan urgently needs access to $1 billion in USD to support its depleting foreign exchange reserves, and the facility’s resuscitation will give it that access right away.
Last week, the finance minister issued a warning that if difficult decisions were not made, Pakistan’s economy would end up in a situation similar to that of Sri Lanka.