Pakistan seeks Arab creditors, China to convert $7.7 bn into long term loans — Hafeez Shaikh

Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh (L) and Chairman Federal Board of Revenue (FBR) Syed Shabbar Zaidi (R) address a media briefing in Islamabad on October 12, 2019. (AFP)
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Updated 04 June 2020

Pakistan seeks Arab creditors, China to convert $7.7 bn into long term loans — Hafeez Shaikh

  • Pakistan received $3 billion BoP support from Saudi Arabia, $2 billion from the UAE and $2.2 from China
  • Conversion of short term deposit will provide long term financial stability to the country, say experts

KARACHI: Pakistan is in talks with Saudi Arabia, the United Arab Emirates and China to extend the tenure of their $7.7 billion short term deposits, a move that will ensure long term forex stability of the South Asian nation, Dr. Abdul Hafeez Shaikh, the prime minister’s adviser on finance and revenue, told Arab News in an exclusive interview.
“Last year, when Pakistan was going through the worst balance of payment (BoP) crisis in our history, we were provided financial support by our brotherly countries,” Shaikh said on Monday.
Pakistan’s friendly countries were approached by the government of Prime Minister Imran Khan soon after assuming the office in 2018 as the country’s current account deficit reached $20 billion.
Responding to Pakistan’s call, Saudi Arabia deposited $3 billion while the UAE and China deposited $2 billion and $2.2 billion, respectively. Qatar also contributed by depositing $0.5 billion with Pakistan’s central bank.
“The $7.7 billion secured from the bilateral arrangements provided the much needed balance of payment support to Pakistan,” he added.
“These are short term deposits placed with the central bank in Pakistan at concessional rates,” the PM’s adviser said, adding: “We are in talks with our development partners to move these deposits toward longer tenors.”
Economists say these deposits provided a lifeline to the country’s economy that had higher imports and lower exports.
“The balance of payment support oxygenated the country’s economy that was much need for its survival. The support helped Pakistan not to default on its foreign payment obligations,” Muzzamil Aslam, senior economist, who is familiar with the developments, told Arab News.
Pakistan’s current account deficit (CAD) was $20 billion in 2018 which declined to $13.43 billion during the last fiscal year. Its further decline is also projected for the current fiscal year (2019-20).
“CAD is projected to decline to $4b [or 1.7 percent of the GDP] in the current fiscal year, compared to $20b when the government took office in 2018,” Shaikh said.
The major balance of payment support came from Saudi Arabia which provided $6 billion in financial assistance to Pakistan, with $3 billion in foreign currency support and $3 billion worth of oil on deferred payments. The agreement was signed during the visit of Prime Minister Imran Khan to the Kingdom in October 2018.
Economists say when Pakistan approached the International Monetary Fund (IMF) for the bailout program, the United States had expressed concerns that the money could be used to pay off debts, especially those taken from China.
“After we started getting the IMF assistance, the fund imposed a condition during the first review of the program to roll over these loans instead of paying them back. This was because the US had misgivings that Pakistan will pay the Chinese debt with the IMF money,” Aslam said.
However, the IMF acknowledged in April that “Bilateral creditors have maintained their exposure in line with debt sustainability objectives of the EFF [Extended Fund Facility].”
China maintained their exposure by renewing $2 billion bilateral deposits in March. Saudi Arabia also refinanced $3 billion BoP support loans that matured in November-January, while the UAE rolled over $1 billion BoP support loans in March. The oil facility with Saudi Arabia – worth $3.2 billion – was activated in August 2019 and has also been providing support to the balance of payments, according to the IMF documents.
Instead of frequent rollovers now, the government wants to convert these short term deposits into long tenors. “The IMF is behind this strategy,” Aslam informed. “The conversion will impact the status of these deposits in a way that loan rates will be decided in line with the international benchmark which may be LIBOR+2-3 percent.”
Economists say the conversion of these deposits will positively impact the economy of the country since Pakistan will get some breathing space and an opportunity to improve its overall financial condition. “It will provide long term forex stability. Otherwise, we will be under pressure to pay back $7.7 billion,” Aslam said.


300 Pakistani doctors return to Saudi after getting stuck in their country

Updated 10 July 2020

300 Pakistani doctors return to Saudi after getting stuck in their country

  • The medical professionals had taken leave from work before the COVID-19 outbreak and were visiting relatives in Pakistan
  • The remaining 200 doctors are scheduled to fly back to the Kingdom next week, says Pakistan’s envoy in Riyadh

ISLAMABAD: More than 300 Pakistani doctors, employed by Saudi hospitals, flew back to the Kingdom last week after getting stuck in their country for months due to the suspension of international flight operations in the wake of the coronavirus outbreak, Pakistan’s Ambassador to Saudi Arabia Raja Ali Ejaz told Arab News on Friday.
The medical professionals had taken leave before the emergence of the COVID-19 pandemic and were visiting relatives in Pakistan.
“Over 300 Pakistani medics and their families returned to Saudi Arabia last week,” the envoy informed. “The remaining 200 are scheduled to return during the second week of July.”
Ejaz said the embassy had raised the issue of Pakistani doctors with the Saudi Ministry of Foreign Affairs in April 2020, soliciting permission for their return so they could help the Kingdom in its battle against the contagion.
“Pakistani doctors are working tirelessly since the beginning of the pandemic and constitute the backbone of the Kingdom’s COVID-19 response,” Dr. Asad Ullah Roomi, president of the Pakistan Doctors’ Group in Riyadh, told Arab News.
He added that the return of the Pakistani medical professionals would help Saudi Arabia deal with the new coronavirus.
“We appreciate the efforts of the Pakistan Embassy that made it possible for these doctors to return to the Kingdom and resume their duties,” he added.
Dr. Imran Chaudhry, resident physician at the Convalescence Hospital & PT Center, Al-Baha, was stuck in Lahore and recently returned to the Kingdom to rejoin his work.
He thanked the Saudi government for facilitating the return of the doctors, saying their presence in the country was vital to help COVID-19 patients.
“We wanted to rejoin our duty to serve the people in need, and the Saudi government turned it into a smooth process. The Kingdom even provided free tickets to those who could not make travel arrangements for their families,” he told Arab News.
“We had to wait for a long time, but we are back in Saudi Arabia now. At the moment, we have quarantined ourselves, but we will resume our work in the next few days,” Chaudhary said.