Pakistan has Welcomed a $2.3 Billion Dollar loan From China Banks to avert foreign exchange crisis
Pakistan will get a 2.3 billion bailout loan from the Chinese Bank Consortium to avoid foreign payment problems. In addition, Pakistan’s finance minister announced the government would introduce taxes and cut current spending to stimulate economic growth.
Pakistan has welcomed a 2.3 billion dollar loan from China, which will help the country avoid incurring losses in foreign exchange trading.
Confirmation of its support from China, a close economic and military ally of Pakistan, came on the same day Islamabad announced a one-off 10% ‘super tax’. Sharif hopes that this will be sufficient to restart stalled $6bn IMF loan discussions.
Today, Ismail Ahmed tweeted that in collaboration with the SMP [State Bank of Pakistan], $2.3 million worth of credits had been funneled into SBP’s accounts today, which will greatly increase foreign reserves and help stabilize an economy that has been suffering from stagnant growth since the beginning of 2016.
A senior government official said that the loan would be "the signal that we're about to return to the IMF program."
China, which made its loan in earnest, had been quietly urging Islamabad to fix its relationship with the IMF "in order to improve Pakistan's economic health and avoid default," a second government official said.
China has agreed to give the Pakistani government a loan worth $800 million. The loan will raise Pakistan's liquid foreign reserves of $8 USD billion to $800 million and could help shore up the rupee, which has slumped against American cash.
Pakistan's economy has been receiving loan payments from the IMF this year under a 39-month loan program, but it is only expected to receive half of the $6 billion in aid needed.
The world’s eighth-largest economy, Sri Lanka has been faced with immense pressure after falling foreign investment rates in recent months raised concerns they could default on their international debt (worth a total of $8 billion).
Prime Minister Shehbaz Sharif, who was elected by parliament in April following the ousting of rival Imran Khan, announced on Thursday the implementation of a new super tax to be levied on manufacturers of active pharmaceutical ingredients. In a surprise announcement during his short visit to Nowshera, Sharif said taxes will be reintroduced on cement, steel, and other products that have long been exempt from such levies.
The government has decided to impose a 10% ‘poverty alleviation tax’ on large-scale industries of the country,” writes Sharif in his tweet.
Business leaders have widely criticized a decision by Pakistan’s government on increasing taxes on sugary drinks. The reaction of the market as a whole has already been seen in the declining value of shares in soft drink manufacturing and distribution companies whose products will see prices rise. Analysts have suggested that the decision could lead to further inflation, which has been a particular concern for Pakistani households given the recent backdrop.
Zaffar Moti, a former KSE director, said: "This is a major setback for the economy. This government needs to stop making excuses for its incompetence."