Pakistan to receive $700mn from China this week

February 22, 2023 (MLN): Cash-strapped Pakistan is set to receive a much-needed boost as China is likely t to provide a loan of $700 million.

The aforesaid announcement was made by Federal Minister for Finance and Revenue, Senator Ishaq Dar, on his official Twitter account on Wednesday.

According to Ishaq Dar, the loan has been approved by the Board of China Development Bank and all formalities have been completed.

The loan is expected to be received by the State Bank of Pakistan (SBP) this week, which will help shore up the country's foreign exchange reserves.

Formalities completed and Board of China Development Bank has approved the facility of US $ 700 million for Pakistan. This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves!

— Ishaq Dar (@MIshaqDar50) February 22, 2023

Pakistan has been struggling with a foreign exchange crisis and the delay in the IMF deal has made the matter worst, and the loan from China is expected to provide some relief to the country's struggling economy.

Pakistan has been seeking loans from various sources to shore up its foreign exchange reserves and stabilize its economy.

This loan from China is part of a series of financial assistance packages that the country has received from its close ally in recent years. With this loan, Pakistan will be able to boost its reserves and work towards economic stability in the long run.

On the IMF front, Secretary of Finance Mr. Hamed Yaqoob Sheikh revealed on Tuesday that the Staff Level Agreement (SLA) will be finalized within three working days.  

In order to comply with IMF conditions, the parliament has approved a bill to increase the general levy from 17% to 18% and boost taxes on imported luxury items, such as mobile phones, from 17% to 25%. This move is expected to generate additional revenue for the government and help in stabilizing the economy.

The decision comes after the fund urged Pakistan to eliminate subsidies and adopt a market-determined exchange rate. In response, the government has already taken steps to raise energy prices and let the currency weaken.

However, further measures pertaining to monetary policy are still required to meet the IMF's conditions.

It is important to note that the SBP has already raised the benchmark interest rate by 725 basis points since the beginning of 2022 to tackle high inflation, which reached a 48-year high in January.

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