Pakistan uses up Chinese trade financing facility to repay debt

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ISLAMABAD: The State Bank of Pakistan (SBP) has largely tapped $1.5 billion in additional trade financing facility available under the China-Pakistan currency swap arrangement. This was revealed by sources in the central bank and the Ministry of Finance, reported the Express Tribune.
After failing to find alternative sources to fund and finance its current account deficit, Pakistan has had to turn to a Chinese trade financing facility to keep foreign currency reserves at current levels and prevent them from further depletion.
At a time when the caretaker Finance Minister Dr Shamshad Akhtar is trying to find a balance between inflows and outflows for June and July, the central bank has used the facility to ameliorate the financial woes facing the country.
Primarily obtained from foreign commercial banks, the state bank tapped the facility to repay over $1 billion in maturing foreign loans. The exact amount of the Chinese facility that Pakistan used could not be ascertained, but an SBP source said it was around $750 million.
Replacing all international financial institutions that are holding back policy loans, China has become the country’s largest creditor for the past couple of years. So far, China has given about $3.8 billion in commercial and project loans, excluding the $1.5-billion currency swap arrangement.
In the current fiscal year 2017-18, China has given about 40 per cent of total foreign loans. The State Bank of Pakistan on 25 May announced that the currency swap arrangement with the People’s Bank of China had been extended for three years in respective local currencies. The trade financing facility was also enhanced from $1.5 billion to $3 billion in dollar terms. Pakistan had earlier fully utilised the $1.5-billion facility.