ISLAMABAD: Pakistan on Friday received a $2.3 billion Chinese consortium loan that would help stabilize its dwindling foreign exchange reserves, Finance Minister Miftah Ismail confirmed, after saying the South Asian nation was no longer on the path to debt default.
The development comes as foreign exchange reserves held by the Pakistani central bank deplete to as little as $8.2 billion — barely enough for 45 days of imports — with the Pakistani rupee at record lows against the US dollar.
Grappling with a balance-of-payment crisis, the South Asian country is still seeking to revive a $6 billion loan program it secured from the International Monetary Fund (IMF) in 2019. The revival of the program, which is stalled since March, will release around $1 billion to Pakistan and help unlock funding from external sources.
The latest deposit by a Chinese consortium provides a crucial boost to Pakistan’s fast-emptying coffers.
“I am pleased to announce that Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into SBP (State Bank of Pakistan) account today, increasing our foreign exchange reserves,” Ismail said on Twitter.
Pakistan entered the 39-month, $6 billion IMF program in 2019, but less than half its size has been disbursed as Islamabad struggled to achieve the targets.
On Friday, the government of Prime Minister Shehbaz Sharif announced a one-year, 10 percent tax on large-scale industries to raise over 400 billion Pakistani rupees ($1.93 billion), in a bid to unlock $1 billion IMF tranche to avert the economic crisis.
Pakistan is expected to receive an updated memorandum on macroeconomic and financial targets from the IMF soon, which would pave the way for the disbursement of the $1 billion installment.
In a parliamentary session to wind up the budget debate on Friday, Ismail said the country was not going to default on international debt, but was instead on the “path to progress” due to the tough economic decisions taken by the government.
On June 10, Pakistan set a revenue target of Rs7 trillion ($34.6 billion), a 17 percent rise on a year-on-year basis, in a Rs9.5 trillion ($47 billion) budget it unveiled for the next fiscal year.
Ismail said the 10 percent super tax on large-scale companies would increase the revenue by Rs470 billion ($2.2 billion).
“We have taken tough decisions,” the finance minister said. “The IMF program is essential to shield the country from default.”
He said the current account deficit in the ongoing fiscal year could reach around $17 billion, adding the meagre foreign exchange reserves held by Pakistan could not sustain this deficit.
To achieve revenue targets, Ismail said the government had also decided to bring at least 2.5 million out of 9 million retail shops in the tax net through a fixed tax.
He said there were around 30,000 gold shops but only 22 of them were registered with the government, adding they would be charged a fixed income and sales tax of Rs40,000.
“This tax is on their income and not expenses and that is why it will not increase inflation, rather help boost the revenue,” the finance minister added.