Pakistan receives $ 700 million from China Development Bank

Islamabad: Finance Minister Mohammad Ishaq Dar has announced that US $ 700 million have been received by State Bank of Pakistan (SBP) from the China Development Bank (CDB).

The minister made the announcement on Twitter. Earlier, Pakistan’s all-weather ally China had approved a loan of US $ 700 million to avert a financial crisis. The announcement by Dar on the loan by the Board of CDB came a day after Pakistan’s National Assembly unanimously passed a money bill aimed at raising tax revenues to fulfill the demands set by the International Monetary Fund (IMF) for seeking a US $ 1.1 billion loan facility to avoid an economic meltdown.

Dar said all formalities had been completed with CDB before the funds were transferred to the SBP.

Pakistan has a chronic balance of payments problem which was exacerbated in the last year, with the country’s forex reserves declining to critical levels.

As of February 10, the central bank had only US $ 3.2 billion in reserves, enough to cover barely three weeks of imports.

To stem dollar outflows, the government has imposed restrictions, allowing imports of only essential food items and medicines until a bailout is agreed upon with the IMF, which is seen as essential for the country to stave off default.

Pakistan has already fulfilled demands of the International Monetary Fund, including raising an additional Pakistani Rs 170 billion in revenues by June before releasing crucial US $ 1.1 billion out of an already agreed US $ 7 billion loan program.

The country needed about US $ 10 billion to US $ 12 billion by June to pay back loans and meet the current account deficit.

The government headed by Prime Minister Shehbaz Sharif has decided to implement measures to cut down on its expenditures by increasing taxes on the public and bringing down government expenses.

The government has also ordered the Foreign Ministry to slash the number of missions abroad and reduce their offices, and staff and initiate other measures to cut down expenditures of the debt-ridden nation by 15 percent.