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Pakistan asks China to transfer $6.3 billion in debt: Report


Pakistan asks China to transfer $6.3 billion in debt: Report

Another proposal is to seek a new Chinese loan to repay bilateral debt.

Islamabad:

Pakistan has asked China to transfer $6.3 billion in debt due in the next eight months as part of a master plan to arrange $34 billion in the current financial year to repay the debt and related obligations. to outside trade, according to one media. Report on Sunday.

Another proposal is also under consideration to seek a new Chinese loan to repay the bilateral debt due in the fiscal year 2022-23, ending June 30, the Express Tribune reported.

The issue of transfer and refinancing for commercial loans of nearly $6.3 billion and central bank debt was discussed during a meeting between Chinese Ambassador to Pakistan Nong Rong and Minister of Finance, the newspaper said. main Mohammad Ishaq Dar on Saturday.

China’s $3.3 billion in commercial loans and $3 billion in Safe Deposit loans are due between now and June next year, according to Treasury officials.

Safe Deposit is on a central bank’s balance sheet.

In addition, more than $900 million of China’s bilateral debt is due for payment in the current financial year.

For the current financial year, the International Monetary Fund and the Ministry of Finance have estimated Pakistan’s total external financing needs between $32 billion and $34 billion, excluding the impact of the devastating floods. recently.

Pakistan received a loan of $2.2 billion in the September-September quarter while Saudi Arabia announced it would transfer a $3 billion debt due in December of this year.

The country still needs a $29 billion arrangement and is seeking a minimum transfer of between $6.3 billion and $7.2 billion from China in addition to any new loans.

Citing sources, the newspaper said this time the government is looking to transfer $3 billion in Safe Deposit over a year, preferably three to five years.

China has extended a total of $4 billion in Safe Deposits, and of these $1 billion was transferred in July of this year.

Prime Minister Shehbaz Sharif will visit Beijing on November 1 with a long list of new projects and requests to reverse existing debt, consider new debt penalties and preferential trade treatment for some goods. exportable.

The cash-strapped country is under pressure from Western institutions and the government to find ways to roll over China’s debt, which currently stands at $26.7 billion including public and guaranteed debt.

China’s commercial loans cannot be reversed but can be refinanced, which requires the government to pay off the debt first and then receive it back.

This consumes considerable time, thus putting pressure on foreign exchange reserves until the transaction is not reversed.

It took China three months to refinance a $2.3 billion commercial loan that Pakistan paid in March. Pakistan’s total foreign exchange reserves now stand at $7.5 billion.

“The Finance Minister also appreciated the support extended by the Chinese leadership for flood relief and refinancing of 15 billion yuan (US$2.24 billion) syndicated facilities. for Pakistan”, according to the announcement of the Ministry of Finance after the meeting.

The statement suggested that both sides discussed the issue of refinancing the commercial loan.

Fitch – the international credit rating agency – on Friday highlighted the conflicting debt reversal claims made by Pakistani policymakers.

“The finance minister had previously said before resigning that Pakistan would seek to write off debts from non-commercial creditors. Prime Minister Shehbaz Sharif has also called for debt forgiveness within the framework of the Paris Club. However, new Here, the Minister of Finance (Ishaq Dar) has publicly ruled this out,” Fitch stated.

Fitch downgraded Pakistan to high-risk debt.

Dar made the right decision to withdraw the Paris Club’s debt restructuring proposal. The Paris Club’s decision to extend its debt has stunned global markets.

The Minister of Finance further highlighted the economic challenges and current government policies are aimed at bringing economic and fiscal stability, his ministry said.

Sources said both sides have also discussed the issue of unpaid Chinese charges due to payments to China’s Independent Power Producers for the cost of purchasing electricity.

Pakistan is expected to solve its lingering problem by opening bank accounts to save Chinese companies from a vicious cycle of mounting debt ahead of the prime minister’s visit.

The finance ministry said Sharif’s proposed visit to China was also discussed during the meeting and both sides hoped that it would strengthen bilateral ties between both countries.

Dar guarantees his full support for the successful implementation of the China-Pakistan Economic Corridor (CPEC) projects, according to the statement.

Rong reaffirmed the Chinese government’s continued support to Pakistan and thanked Islamabad for facilitating Chinese companies in various projects in the country.

Rong also ensures the full support and cooperation of the Chinese government in the development of Special Economic Zones as part of CPEC.

The issue of changing the design and scope of a much-delayed 300-megawatt Gwadar imported coal-fired power plant was also discussed.

Pakistan wants to postpone the plan due to the high cost of imported fuel and prioritizing local resources.

China Communications Construction Corporation (CCCG) planned to set up the factory at a cost of 542 million USD. But diplomatic sources said the Chinese government did not want to change the fuel to LNG or use Thar coal due to the high cost.

Pakistan cannot make any unilateral changes to the project and will have to give its decision before the JCC for approval, the strategic planning body for CPEC.

The JCC meeting is scheduled to be held on October 27, according to the newspaper.

The International Monetary Fund (IMF) on August 29 approved the issuance of $1.17 billion in cash to the cash-strapped country, providing much-needed budget support to meet the fiscal deficit and to foreign.

Despite the IMF’s disbursement, the economic situation remains precarious.

The devastating floods, which have killed more than 1,700 people and displaced more than 30 million, have added to Pakistan’s exchange rate troubles, with an estimated $30 billion in damage to the economy.

(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)

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