Pakistan requests China to rollover USD 6.3 billion debt

Islamabad: Pakistan has requested China to rollover its USD 6.3 billion debt that is maturing in the next eight months as part of its overall plan to arrange USD 34 billion in the current fiscal year to meet its debt and external trade-related obligations, according to a media report on Sunday.
Another proposal was also under consideration to seek a fresh Chinese loan to repay the maturing bilateral debt during the fiscal year 2022-23, ending on June 30, the Express Tribune newspaper reported.
The issue of rollover and refinancing of nearly USD 6.3 billion commercial loans and the central bank debt was discussed in a meeting between Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar on Saturday, the paper said.
The USD 3.3 billion Chinese commercial loans and USD 3 billion worth of Safe deposits loans were maturing from now till June next year, according to the Ministry of Finance officials.
The Safe deposit is on the balance sheet of the central bank.
In addition to this, over USD 900 million in bilateral Chinese debt was becoming due during the current fiscal year.
For the current fiscal year, the International Monetary Fund and the Ministry of Finance have estimated Pakistan’s gross external financing requirements in the range of USD 32 billion to USD 34 billion, excluding the impact of the recent devastating floods.
Pakistan has already obtained USD 2.2 billion in loans during the July-September quarter while Saudi Arabia has announced to rollover USD 3 billion debt maturing in December this year.
The country still needs to arrange USD 29 billion and it is looking for a minimum of USD 6.3 billion to USD 7.2 billion rollover from China in addition to any fresh lending.
Citing sources, the paper said that this time the government was seeking rollover of the USD 3 billion Safe deposit for more than one year, preferably for three to five years.
China has extended a total of USD 4 billion in Safe deposits and out of this USD 1 billion has already been rolled over in July this year.
Prime Minister Shehbaz Sharif is visiting Beijing on November 1 with a long list of new projects and requests to rollover the existing debt, considering sanctioning new debt and preferential trade treatment for certain exportable goods.
The cash-strapped country is under pressure from western institutions and the governments to seek rollover of Chinese debt, currently standing at USD 26.7 billion including public and publicly guaranteed debt.
Chinese commercial loans cannot be rolled over but can be refinanced, which requires the government to first pay the maturing debt and then get it back.
This consumes significant time, which in turn puts pressure on the foreign exchange reserves until the transaction is not reversed.
China had taken three months’ time in refinancing a USD 2.3 billion commercial loan that Pakistan paid back in March. Pakistan’s gross foreign exchange reserves currently stand at USD 7.5 billion.
The finance minister also appreciated the support extended by the Chinese leadership for flood relief and refinancing of syndicate facilities of RMB 15 billion (USD 2.24 billion) to Pakistan,” according to a statement issued by the Ministry of Finance after the meeting.
The statement suggests that both sides discussed the issue of commercial loan refinancing.
Fitch — the international credit rating agency — on Friday highlighted the contradictory debt rollover statements given by Pakistani policymakers.
The previous finance minister said before resigning that Pakistan would seek debt relief from non-commercial creditors.
Prime Minister Shehbaz Sharif also appealed for debt relief within the Paris Club framework. More recently, however, the Minister of Finance (Ishaq Dar) publicly ruled this out, Fitch stated.
Fitch downgraded Pakistan to the highly risky debt category.
Dar took the right decision to withdraw the motion of seeking Paris Club debt restructuring. The Paris Club debt rescheduling decision was unnerving the global markets.
The finance minister further highlighted the economic challenges and policies of the present government with the aim to bring about economic and fiscal stability, his ministry stated.
Sources said that both sides also discussed the issue of outstanding Chinese dues on account of payments to the Chinese Independent Power Producers for the cost of the electricity purchase. —PTI


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