China’s $600 million rollover further boosts reserves

ISLAMABAD: The Export-Import (Exim) Bank of China has rolled over a USD600 million loan to Pakistan further bolstering the dwindling foreign exchange reserves of the country, Prime Minister Shehbaz Sharif announced on Tuesday.

The refinancing comes as Pakistan grapples with an economic crisis, marked by a severe balance of payments problem. The rollover of the matured debt was announced at an event in Islamabad, where Sharif expressed confidence in the country’s youth to drive economic growth.

“Our foreign exchange reserves are increasing, but we aim to achieve this not through loans, but by generating our own income,” Sharif said, emphasizing the potential of the country’s youth in sectors such as sports, information technology, industries, and agriculture.

This move follows China’s refinancing of over USD5 billion in loans for Pakistan in the past three months, a crucial lifeline that helped the country avoid a sovereign default as negotiations for an International Monetary Fund (IMF) bailout were underway.

The IMF approved a USD3 billion bailout program for Pakistan at the end of June, with the first tranche of USD1.2 billion already disbursed. Additional financial support from Saudi Arabia and the United Arab Emirates, amounting to USD2 billion and USD1 billion respectively, has also helped stabilize the economy, according to Finance Minister Ishaq Dar.

The State Bank of Pakistan (SBP) reported a surplus of USD334 million in June, with the current account showing signs of recovery. The central bank’s foreign exchange reserves are expected to exceed USD9 billion following the latest inflow from China, a significant increase from the USD4.524 billion reported in the week ending July 7.

The IMF has projected that Pakistan will have an import cover of 1.4 months in fiscal 2024, a marked improvement from barely a month of controlled imports. The fund has also outlined a tight monetary policy aimed at curbing inflation, which is expected to average 25.9% in fiscal year 2024, moderating to around 16% by the end of that period.

The Prime Minister also launched the Youth Sports Initiative, a program aimed at promoting sports and youth development in the country. The initiative includes the establishment of the Sports Endowment Fund, the country’s first sports university in Islamabad, the Elite Sportsperson Development Program, and measures for the promotion of traditional as well as e-sports.