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China grants financial assistance of $2.2 billion to Pakistan; forex reserve touches $17.8 billion

In an attempt to bail-out its close friend from the bankruptcy and to shore up the foreign reserve of its close ally, China on Monday announced that “It has invested $2.2 billion in Pakistan.”

Quoting to the Monday’s report published in the Express Tribune, the report said that “With the aim to help Pakistan to make the international payments on import and debt repayments counters, China has deposited $2.2 billion in State Bank of Pakistan (SBP), foreign currency reserves.”

Recently, Suadi Arabia announced the investment of $3 billion in Pakistan whereas the United Arab Emirates and China invested $2 billion and $4.2 billion respectively.

Moreover, the new grant of $2.2 billion from China, Will make a total of $9.1 billion as financial assistance which Pakistan has received so far from its close allies.

The State Bank of Pakistan tweeted “As the proceeds of the loan obtained by the government of Pakistan from China, the bank has received RMP 15 billion (approx $2.2 billion).”

According to the central bank’s weekly report “The State Bank of Pakistan stood at $8.84 billion till March 15, 2018.”

In a tweet by the Finance Ministry’s spokesperson, Khaqan Najeeb tweeted that “the new investment from the china is expected to boost the SBP’s foreign reserves in double-digit by $10.67 billion.”

The tweet added, “The net foreign exchange reserves held by the commercial banks at $6.91 billion, and the implementation of a successful strategy has ensured the total foreign exchange reserves of the country at $17.58 billion.”

The report added, “The comparatively higher imports than the exports and debt repayments made the country reserve unstable, as the government was partially financing such international payments issuing the reserves.”

the express tribune report also said that “Apart from the financial support to the country, the Riyadh has also enabled a $3 billion petroleum oil supply line on deferred payment.”

“Whereas the Finance Minister Asad Umar had estimated the financial gap of around $12 billion for the 2019 fiscal year and another $7 – $8 billion for the fiscal year of 2020.”

The loan by Pakistan’s close allies was given at the interest rates of 2.5 to 5 percent to shore up the State Bank of Pakistan’s foreign currency reserves and averting the payment defaults.

During the visit to Pakistan in December last year, UAE crowned price had announced the package of $6 billion to the Pakistan, which included $3 billion as a cash deposit and a credit line of another $3 billion for the supply of petroleum oil on deferred payment.”

However, Pakistan last month said that “It has failed to secure the $3.2 billion oil deferred payments facility from the UAE.”

Arif Habib, Limited Head of Research Samiullah Tariq has recently said that “The deposits are coming at a very critical time as Islamabad is set to make a large external debt payment next month – April, while its reserves remain under pressure.”

Adding to this he said, “Pakistan is scheduled to pay off $1 billion for a maturing Eurobond in April.. this will be in addition to other external debt payments during the month.”

The increased international payment pressure led to depletion of Pakistan’s foreign currency reserves to an almost five-year low at $6.63 billion as on January 18, 2019.