ISLAMABAD (Dunya News) - Sandwiched between twin deficits and mounting public pressure to taper off inflation, Pakistan on Wednesday got assurances from friendly countries China, Saudi Arabia and the United Arab Emirates to roll over debt for one year.
According to Bloomberg, this generosity by China, KSA and UAE is being seen as a shot in the government’s arm as it awaits final nod of a new $7 billion loan programme with the International Monetary Fund (IMF).
Pakistan has a special arrangement with these friendly countries as they extend their financial assistance in the form of commercial loans and SAFE deposits that are rolled over every year to help Pakistan meet its financial needs and avoid a default.
According to sources, Pakistan seeks an extension of three years maturity period of loans of $5bn from China, $4bn from Saudi Arabia, and $3bn from the UAE which might offer greater certainty under the IMF programme.
Bloomberg sources said Finance Minister Muhammad Aurangzeb told media in Islamabad that the volume of rollovers would be the same as last year, informing that the country had $12bn in bilateral loans.
NEW $7 BILLION LOAN DEAL WITH IMF
Pakistan is expected to reach a staff-level agreement with the IMF for a new $7 billion loan to support its economy as well as deal with its debts.
Earlier this year, the IMF approved the immediate release of the final $1.1 billion tranche out of the $3 billion bailout to Pakistan. Finance Minister Muhammad Aurangzeb said the government planned to seek a long-term loan to help stabilise the economy after the end of that bailout package.
The new loan deal will last 37 months. It is aimed at strengthening fiscal and monetary policy as well as reforms to broaden the tax base, improve the management of state-owned enterprises, strengthen competition, secure a level playing-field for investment, enhance human capital, and scale up social protection through increased generosity and coverage in a major welfare programme, the IMF said.
“The programme aims to capitalise on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector-led growth,” said Nathan Porter, IMF’s mission chief to Pakistan.
The agreement is subject to approval by the IMF’s executive board.
Pakistan’s new coalition government presented its first budget in parliament last month, promising an increase of up to 25pc in the salaries of government employees and setting an ambitious tax collection target.
The finance minister said Pakistan wanted to collect Rs13 trillion ($44 billion) in taxes, which would be 40pc more than in the current fiscal year.
Aurangzeb also said the government wiould ensure that the number of taxpayers increased. "Only about five million people in Pakistan pay taxes."
Pakistan in 2023 nearly defaulted on the payment of foreign debts.