Pakistan to receive $2.1 billion loan from China by March 25

In this file photo, Pakistani Prime Minister Imran Khan, left, and China’s Premier Li Keqiang attend a welcome ceremony at the Great Hall of the People in Beijing on Nov. 3, 2018. (AFP)
Updated 22 March 2019
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Pakistan to receive $2.1 billion loan from China by March 25

  • Pakistani finance ministry says loan will “help improve foreign exchange reserves and ensure balance of payment stability”
  • Pakistan also “closely engaged” in bailout discussions with the IMF

ISLAMABAD: Pakistan will receive a loan worth $2.1 billion from staunch ally China by Monday, the Pakistani finance ministry said, an injection that will help stabilize a wobbly economy hurt by a shortage of dollars plus ballooning current account and fiscal deficits.
Pakistan has been searching for investment from friendly countries since the government of Prime Minister Imran Khan took office in August.
Both Saudi Arabia and the United Arab Emirates have each offered Islamabad loan packages of $3 billion. Islamabad is also in talks with the International Monetary Fund (IMF) for a bailout deal expected to be signed next month. 
Unlike China and countries in the Middle East, the IMF is likely to demand painful structural reforms that might clash with the political agenda of Khan, who on the campaign trail vowed to build an Islamic welfare state.
“All procedural formalities for the loan worth $2.1 billion from China have been completed,” Dr. Khaqan Hassan Najeeb, the spokesperson for the Ministry of Finance, told Arab News, adding that the amount would be deposited in the central bank of Pakistan by March 25 to “help improve foreign exchange reserves and ensure the balance of payment stability.”
In November last year, China promised to support Pakistan’s economy following a meeting in Beijing between Chinese Premier Li Keqiang and Prime Minister Khan. The two countries also share the $60 billion China-Pakistan Economic Corridor (CPEC), which Beijing touts as the flagship infrastructure program in its vast Belt and Road Initiative.
On Friday, Gerry Rice, Director of Communications at the IMF, said at a press conference that the Fund was “closely engaged” in discussions with Pakistan for a loan deal and would take a mission to Pakistan “shortly.”
“I can’t put a date on when they [discussions] would conclude or when we would be in a position to announce agreement,” Rice added.
Fitch Solutions, a statistical rating organization headquartered in New York, said in a statement last month that Pakistan and the IMF could reach an agreement for a potential bailout package of about $12 billion.


No change in instructions on purchase of foreign currency by banks, clarifies central bank

Updated 22 July 2019
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No change in instructions on purchase of foreign currency by banks, clarifies central bank

  • Some media outlets misinterpreted the updated version of Foreign Exchange Manual, causing confusion
  • Commercial banks cannot replace exchange companies, says Malik Bostan

KARACHI: Pakistan’s exchange companies would continue to play their role in the country’s economy, clarified the State Bank of Pakistan on Monday, noting that there was no change in the instruction on purchase of foreign currency notes by banks who were already allowed to deal in international currencies through authorized branches.
The confusion was caused when some local and foreign media outlets misinterpreted the updated version of the central bank’s instructions in its Foreign Exchange Manual, thinking that the country’s currency exchange companies were being drive out of business and commercial banks were going to assume their role. 
“SBP is in process of revision of Foreign Exchange (FE) Manual in phased manner. In this respect, seven chapters (1, 2, 3, 4, 5, 7 & 20) of FE Manual have been revised and circulated through FE Circular dated November 29, 2018, in the first phase. In phase II, three chapters 8, 9 & 11 have been revised through FE Circular No. 03 of 2019 dated July 16, 2019,” a statement issued by the central bank said. 
One of these revised chapters, 11, includes regulations on “Dealings in Foreign Currency Notes and Coins etc. by the Authorized Dealers (banks).”
“With respect to revised Chapter 11, it has come to our notice that there are some confusions/misinterpretations regarding Para 2 suggesting that SBP has allowed the banks to sell/purchase foreign currencies to/from public by amending the existing regulations,” the SBP said while clarifying that no such amendment had been made.
Currency dealers also said they were playing a vital role for the country’s economy "that cannot be downplayed."
“Banks were already authorized to undertake foreign exchange currency business through authorized branches, but they did not take interest in currency dealing which is evident from the fact that only a few of them established such branches,” Malik Bostan, president of the Forex Association of Pakistan, told Arab News on Monday.
Bostan added that “we are operating on meager profit that commercial banks can’t afford to make.”