Pakistan receives $2.2 bn loan from China to stabilize economy

Chinese Foreign Minister Wang Yi and Pakistani Foreign Minister Shah Mehmood Qureshi shake hands after a news conference at the Diaoyutai State Guesthouse in Beijing, China on March 19, 2019. (Reuters)
Updated 25 March 2019
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Pakistan receives $2.2 bn loan from China to stabilize economy

  • Chinese loan boosts foreign exchange reserves to around $11 billion
  • Currency reserves remain under constant pressure due to increasing foreign debt obligations

KARACHI: Pakistan on Monday received a $2.2 billion loan from staunch ally China to stabilize high fiscal and current account deficits, raising the country’s foreign exchange reserves to around $11 billion.
The move comes as Pakistan, which has opened talks with the International Monetary Fund about a possible bailout, faces a struggle to avoid a balance of payments crisis that has left it with growing debts and dwindling foreign exchange reserves.
“Yes we have received $2.2 billion from the China today,” Abid Qamar, a spokesman for the State Bank of Pakistan (SBP) told Arab News.
In November last year, China promised to support Pakistan’s economy following a meeting in Beijing between Chinese Premier Li Keqiang and Pakistani Prime Minister Imran Khan but the exact amount of the loan package was not announced.
“The inflow of Chinese financial assistance will improve foreign exchange reserves and ensure balance of payment stability,” Dr. Khaqan Hassan Najeeb, a spokesperson for the finance ministry, said.
Central bank data for up until March 15, 2019 shows that with the injection of the Chinese loan, foreign exchange reserves will increase to around $11 billion and total liquid reserves to around $17.9 billion.
Pakistan has been searching for investment from friendly countries since the government of Prime Minister Imran Khan took office in August. Last year, both Saudi Arabia and the United Arab Emirates also offered Islamabad loan packages of $3 billion. Saudi Arabia offered an additional $3 billion for import of oil on differed payments.  
But despite the foreign inflows, currency reserves remain under constant pressure due to increasing foreign payment obligations. The rupee traded at 140.40 against the US dollar in the interbank market on Monday as compared to 140.36 on Friday.
“There was no impact of the Chinese inflows today on the exchange rate but it could be on Tuesday,” Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan, told Arab News. “Uncertainty about IMF is one of the reasons. Despite foreign inflows, currency reserves are continuously falling.”
Pakistan’s net international reserves also continue to deteriorate on the back of high debt repayments. Over the next twelve months, Pakistan has to pay $14.6 billion in debt servicing including $12.8 billion as principal repayment and $1.8 billion as interest, according to Arif Habib Limited research.


Egypt agrees to pay Israel $500 million to end gas dispute

Updated 19 min 8 sec ago
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Egypt agrees to pay Israel $500 million to end gas dispute

CAIRO: Egypt says it has struck a deal with the state-owned Israel Electric Corp. to settle a fine for halting deliveries of natural gas.
A statement from Egypt’s Petroleum Ministry said the settlement deal, which was signed Sunday, would reduce the $1.7 billion fine to $500 million.
It says Egypt will pay the amount over eight and a half years.
In return, the Israeli company would drop other claims resulting from a 2015 arbitration decision.
Israel Electric had sued the state-owned Egyptian General Petroleum Corporation and Egyptian Natural Gas after a 2005 deal to export natural gas to Israel collapsed in 2012 amid militant attacks on a pipeline in the Sinai Peninsula, where Egypt has been battling insurgency for years.
Israel relied on the pipeline to meet its energy needs.