BEIJING: China has returned to rescue Pakistan as it agreed to provide a $ 1.5 billion financing facility to repay the $ 2 billion Saudi Arabia Debtsources told the Express Tribune.
Pakistan will return the $ 1 billion on Monday and the remaining $ 1 billion is due in January, finance ministry sources told the Tribune.
The report noted that this time China has not provided the loan from its State Administration of Foreign Exchange, commonly known as SAFR deposits, nor has it extended a commercial loan to Islamabad.
This time, both countries agreed to increase the size of a 2011 bilateral foreign exchange agreement (CSA) by an additional 10 billion Chinese yuan or about $ 1.5 billion, the sources said.
This has increased the size of the general commercial facility to 20 billion Chinese yuan or $ 4.5 billion.
The benefit of this arrangement will be that the additional $ 1.5 billion Chinese loan will not be reflected in the federal government’s book and will not be treated as part of Pakistan’s external public debt.
Pakistan is going through a serious debt crisis. In early November, it was reported that Pakistan had decided to apply for a $ 2.7 billion loan from China for the construction of Package I of the Mainline-1 project of the China Pakistan Economic Corridor (CPEC).
Pakistan paid 20.5 billion Pakistani rupees in interest to China for the use of the $ 3 billion trade finance facility in the last fiscal year alone, according to the central bank’s financial statement.
China has become Pakistan’s biggest creditor in recent years. The trading facility, originally intended to promote bilateral trade in the respective local currencies, has been used to pay off the foreign debt.
The $ 3 billion money is part of the current $ 13.4 billion in foreign currency reserves held by the central bank, the State Bank of Pakistan (SBP) confirmed to The Express Tribune last month.
Prime Minister of Pakistan Imran khan has visited Saudi Arabia twice to secure a loan. Saudi Arabia had agreed to provide a financial package worth 6.2 billion dollars to Pakistan for three years. This included $ 3 billion in cash assistance and $ 3.2 billion in annual oil and gas supply in deferred payments.
Under the agreement, the Saudi Arabian cash and oil facility had a duration of one year with the option to roll over the amount at the end of the year for a period of three years.
However, Saudi Arabia claimed its money ahead of schedule. Pakistan was paying 3.2 percent interest on the $ 3 billion credit line, according to information the Finance Ministry shared with the National Assembly.
The Saudi oil facility has already been suspended. While Pakistan has also paid Saudi Arabia $ 1 billion of the $ 3 billion in May this year. Pakistan returned $ 1 billion to Saudi Arabia after receiving a loan of the same amount from China.
The government has also been unable to restore the suspended $ 6 billion IMF program, making it difficult for it to continue uninterrupted foreign inflows.
.
