Pakistan requests China to roll over its USD 6.3 billion debt
Oct 23, 2022
Islamabad [Pakistan], October 23 : Pakistan on Saturday requested its all-weather ally China to roll over its USD 6.3 billion debt amid a slump in its economy due to devastating floods.
The debt is maturing in the next eight months and the new proposal seeking a fresh Chinese loan to repay maturing bilateral debt during FY 2022-23 is also under consideration, ending on June 30, reported The Express Tribune.
Pakistan plans to arrange USD 34 billion in the current fiscal year to meet its debt and external trade-related obligations.
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, reported The Express Tribune.
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.
Prime Minister Shehbaz Sharif is visiting Beijing on November 1 with a list of new projects and requests to roll over the existing debt, considering sanctioning new debt and preferential trade treatment for certain exportable goods.
Pakistan 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, reported The Express Tribune.
Pakistan is expected to solve the lingering issue of opening a bank account to save Chinese companies from the vicious cycle of circular debt before the PM's visit.
The proposed visit of PM Shehbaz to China was also discussed in the meeting and both sides hoped that it would enhance bilateral relations between both countries, the finance ministry said.
The USD 3.3 billion Chinese commercial loans and USD 3 billion worth 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, reported The Express Tribune.
Sources said that the government was seeking a 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.
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, reported The Express Tribune.
Pakistan has already obtained USD 2.2 billion in loans during the July-September quarter while Saudi Arabia has also announced to roll over 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 rollovers from China in addition to any fresh lending, reported The Express Tribune.
