China bails out debt-ridden Pakistan again to repay Saudi loan

BEIJING: China bails out again Pakistan since he agreed to provide a $ 1.5 billion line of financing to repay the $ 2 billion Saudi Arabia’s debtsources told Express Tribune.
Pakistan is expected to return the $ 1 billion on Monday and the remaining $ 1 billion is due in January, finance ministry sources told Tribune.
The report notes that this time, China did not grant the loan from its state foreign exchange administration, commonly known as SAFR deposits, nor did it grant a commercial loan to Islamabad.
This time, the two countries agreed to increase the size of the 2011 bilateral currency exchange agreement (CSA) by an additional 10 billion Chinese yuan, or about $ 1.5 billion, the sources said.
This increased the size of the global trade 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 ledger and it will not be treated as part of Pakistan’s external public debt.
Pakistan is going through a serious debt crisis. Earlier in November, it was reported that Pakistan had decided to seek a $ 2.7 billion loan from China for the construction of Package I of the China Pakistan Economic Corridor (CPEC) Mainline-1 project.
Pakistan paid 20.5 billion Pakistani rupees in interest to China for using the $ 3 billion trade finance facility in the last fiscal year alone, the bank’s financial statement said. central.
China has become Pakistan’s biggest creditor in recent years. The trade facility, originally intended to promote bilateral trade in the respective local currencies, was used to pay off foreign debt.
The $ 3 billion silver is part of the $ 13.4 billion in foreign exchange reserves held by the central bank, the State Bank of Pakistan (SBP) confirmed to The Express Tribune last month.
Pakistani Prime Minister Imran Khan had visited Saudi Arabia twice to get a loan. Saudi Arabia had agreed to provide a financial envelope worth $ 6.2 billion to Pakistan for three years. This included $ 3 billion in cash assistance and $ 3.2 billion in annual oil and gas supply on deferred payments.
In accordance with the agreement, the Saudi oil and liquidity facility was for a term of one year with an option to roll over the amount at the end of the year for a period of three years.
However, Saudi Arabia claimed its money earlier than expected. Pakistan was paying 3.2 percent interest on the $ 3 billion facility, according to information the finance ministry shared with the National Assembly.
The Saudi oil installation has already been suspended. While Pakistan also repaid Saudi Arabia $ 1 billion of the $ 3 billion in May of this year. Pakistan returned $ 1 billion to Saudi Arabia after taking an equal loan from China.
The government was also unable to reinstate the IMF’s suspended $ 6 billion program, making it difficult for it to continue uninterrupted foreign flows.

About Arla Lacy

Check Also

Financial products to complement your PPP loan

In 2020, many small businesses applied for and benefited from the Federal Paycheck Protection Program …