Finance Minister Miftah Ismail Friday announced that a Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into the State Bank of Pakistan’s (SBP) account, increasing Pakistan’s foreign exchange reserves.
I am pleased to announce that Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into SBP account today, increasing our foreign exchange reserves.— Miftah Ismail (@MiftahIsmail) June 24, 2022
Earlier, Pakistan had signed a loan facility agreement with a Chinese consortium of banks to aid the depleting foreign exchange reserves and depreciation of the local currency.
“We thank the Chinese government for facilitating this transaction,” the finance minister wrote in a tweet after the signing of the agreement.
The Chinese consortium of banks has today signed the RMB 15 billion (~$2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday. Inflow is expected within a couple of days. We thank the Chinese government for facilitating this transaction.— Miftah Ismail (@MiftahIsmail) June 22, 2022
The agreement with Chinese banks is expected to bolster the country’s reserves and enable it to make import payments while lending some support to the rupee as well which has lost over 34% since the start of the outgoing fiscal year 2021-22.
The development came as a massive relief to economic policymakers after foreign exchange reserves held by the SBP fell below $9 billion as of June 10, with the level staying at less than six weeks of import cover.
On Thursday, the data from the central bank showed that Pakistan’s total liquid foreign exchange reserves clocked in at $14,210.4 million, down from $14,943 million last week.
The total liquid foreign exchange reserves are at their lowest since January 18, 2019.
The break-up showed that the foreign reserves held by the SBP are at $8,237.7 million. The SBP had said that the decline of $748 million in its foreign reserves in the outgoing week was due to external debt repayments.
The SBP reserves are the lowest since October 25, 2019, which means that Pakistan has an import cover of only 1.21 months.
Meanwhile, the net foreign reserves held by commercial banks stood at $5,972.7 million.