Finance Minister Ishaq Dar on Friday said that the State Bank of Pakistan (SBP) has received $700 million from the China Development Bank (CDB) in a much-needed boost to forex reserves as the country grapples with a worsening economic crisis.
The finance minister took to Twitter to make the announcement. “AlhamdoLilah! Funds $700 million received today by State Bank of Pakistan from China Development Bank”.
In an earlier tweet, Dar had maintained that the loan would “shore up” Pakistan’s foreign exchange reserves.
Formalities completed and Board of China Development Bank has approved the facility of US $ 700 million for Pakistan. This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves!
— Ishaq Dar (@MIshaqDar50) February 22, 2023
Earlier this month, the country’s foreign exchange reserves slipped to the alarming level of below $3 billion for the first time in nine years, reducing import capacity to slightly over two weeks.
As the government seeks to revive the International Monetary Fund (IMF) programme, Pakistan has sought to secure assurances from Saudi Arabia and China for more loans.
Read more: Chinese bank approves $700m to Pakistan, says Dar
Devastating floods last year and repeated bouts of political turmoil have left the country struggling to pay for basic goods and at serious risk of joining the list of defaulters.
It desperately needs the IMF to release an overdue tranche of $1.1 billion from an existing bailout programme. The country’s finance secretary has said he hopes talks with the Fund can be wrapped up this week.
But with its debt-to-GDP ratio already in the 70% danger zone and between 40% and 50% of the government revenues earmarked for interest payments alone this year, it will soon need more.
Also read: Foreign currency reserves rise to 4-week high
The country is now hoping that its friends would come to its rescue as it has done all the hard yards to convince the IMF.
Islamabad has agreed to implement the Memorandum of Economic and Financial Policies (MEFP), which contains policy suggestions by the IMF.
Sources have revealed that the staff-level agreement between the fund and the government is expected next week.