Government Gets Temporary Reprieve as Friendly Nations Roll Over $12bn Debt,
Pakistan is poised to secure a crucial $7 billion deal with the International Monetary Fund (IMF) after friendly countries agreed to extend a loan repayment period. This breakthrough comes as a significant relief for Pakistan’s economy, which has been facing a severe financial crisis.
Pakistan has received assurances from China, Saudi Arabia and UAE to extend the loan repayment period.
Pakistan has to pay bilateral loans of 12 billion dollars to friendly countries in this year and now the key demand of IMF has been met as China, Saudi Arabia, and UAE have assured a one-year extension of the loan period.
$12bn rollover assurances from friendly nations,
In this regard, Pakistan requested its three largest bilateral partners — Kingdom of Saudi Arabia, China, and United Arab Emirates — to grant rollover in deposits of $12 billion for three to five years.
Pakistan owes $5 billion to Saudi Arabia and $4 billion to China
Pakistan also has to return the $3 billion loan to the United Arab Emirates,The Finance Minister confirmed the possible extension of the loan repayment period as Pakistan is also determined to fill the financing gap of 3 to 5 billion dollars in the next three years.
Pakistan has also requested loan relief from China for power plants.
Pakistan has a special arrangement with these friendly countries as they extend their financial assistance in the form of commercial loans and SAFE deposits that are rolled over every year to help Pakistan meet its financial needs and avoid a default.
Bloomberg sources said Finance Minister Muhammad Aurangzeb told media in Islamabad that the volume of rollovers would be the same as last year, informing that the country had $12bn in bilateral loans.
NEW $7 BILLION LOAN DEAL WITH IMF
Pakistan is expected to reach a staff-level agreement with the IMF for a new $7 billion loan to support its economy as well as deal with its debts.
Earlier this year, the IMF approved the immediate release of the final $1.1 billion tranche out of the $3 billion bailout to Pakistan. Finance Minister Muhammad Aurangzeb said the government planned to seek a long-term loan to help stabilise the economy after the end of that bailout package.
The new loan deal will last 37 months. It is aimed at strengthening fiscal and monetary policy as well as reforms to broaden the tax base, improve the management of state-owned enterprises, strengthen competition, secure a level playing-field for investment, enhance human capital, and scale up social protection through increased generosity and coverage in a major welfare programme, the IMF said.
“The programme aims to capitalise on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector-led growth,” said Nathan Porter, IMF’s mission chief to Pakistan.
The agreement is subject to approval by the IMF’s executive board.
Pakistan’s new coalition government presented its first budget in parliament last month, promising an increase of up to 25pc in the salaries of government employees and setting an ambitious tax collection target.
The finance minister said Pakistan wanted to collect Rs13 trillion ($44 billion) in taxes, which would be 40pc more than in the current fiscal year.
Aurangzeb also said the government wiould ensure that the number of taxpayers increased. “Only about five million people in Pakistan pay taxes.”
Pakistan in 2023 nearly defaulted on the payment of foreign debts.
