Pakistan has received a much needed boost to its foreign exchange reserves with the State Bank of Pakistan receiving $700 million from China Development Bank. The funds come at a time when the country’s bailout programme with the International Monetary Fund (IMF) remains stalled, and foreign exchange reserves held by the SBP had increased by only $66 million, leaving Pakistan’s policymakers scrambling to secure inflows. To revive the IMF programme, Pakistan has implemented several prior conditions, including passing a mini-budget that imposed nearly Rs170 billion of taxes. The receipt of the $700 million from China Development Bank will be a welcome relief for the country.
The Board of the China Development Bank (CDB) has approved the disbursement of $700 million for Pakistan, said Federal Minister for Finance and Revenue Ishaq Dar on Wednesday.
“Formalities completed and Board of China Development Bank has approved the facility of $700 million for Pakistan,” Dar announced in a post on Twitter.
“This amount is expected to be received this week by the State Bank of Pakistan (SBP), which will shore up its forex reserves!” added Dar.
The statement comes as Pakistan’s foreign exchange reserves have dwindled to a critically low level, and are not enough to cover the import of some 20 days.
Last week, the country’s total liquid foreign exchange reserves rose by $162 million during the last week. The total liquid foreign exchange reserves held by the country stood at $8.702 billion as of February 10, 2023 compared to $8.54 billion on Feb 3, 2023.
After declining $1.68 billion during the last three weeks, the SBP’s reserves increased by $ 276 million to $ 3.193 billion during the week under review.
Meanwhile, Pakistan remains in talks with the International Monetary Fund (IMF) for the resumption of the stalled Extended Fund Facility (EFF) programme.
Pakistan expects to conclude talks with the IMF over a staff-level agreement as soon as this week, Hamed Yaqoob Sheikh, the top official in the finance ministry, said in a crucial step towards unlocking funds to battle an economic crisis.
An IMF mission spent more than a week in Islamabad earlier this month to discuss a policy framework to allow the release of more than $1 billion in funding from a stalled $6.5 billion bailout package, originally approved in 2019.
However, the mission left without a conclusion.
The China Development Bank (CDB) is a development bank in China. As one of three policy banks in China, it is responsible for raising funds for large-scale infrastructure projects.
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