ISLAMABAD: Pakistan has received significant relief from its ‘Friends in Need’ as China, Saudi Arabia, and the United Arab Emirates (UAE) have agreed to roll over $12 billion in debt for one year.
Amidst twin deficits and mounting public pressure to control inflation, Pakistan on Wednesday secured assurances from friendly nations China, Saudi Arabia, and the UAE to extend the maturity of their debt by one year.
Pakistan seeks an extension of the three-year maturity period for $5 billion from China, $4 billion from Saudi Arabia, and $3 billion from the UAE. The country is also expected to reach a staff-level agreement with the IMF for a new $7 billion loan.
Bloomberg reported that the generosity of China, Saudi Arabia, and the UAE is seen as a boost for the government as it awaits final approval of a new $7 billion loan program with the International Monetary Fund (IMF).
Pakistan has a special arrangement with these countries, receiving financial assistance in the form of commercial loans and SAFE deposits, which are rolled over annually to help meet its financial needs and avoid default.
Finance Minister Muhammad Aurangzeb informed the media in Islamabad that the volume of rollovers will remain the same as last year, with the country having $12 billion in bilateral loans.
Pakistan is expected to reach a staff-level agreement with the IMF for a new $7 billion loan to support its economy and address its debts.
Earlier this year, the IMF approved the immediate release of the final $1.1 billion tranche from the $3 billion bailout to Pakistan.
The Finance Minister noted that the government plans to seek a long-term loan to stabilize the economy after the bailout package concludes.
The new loan deal will span 37 months, focusing on strengthening fiscal and monetary policy, broadening the tax base, improving the management of state-owned enterprises, enhancing competition, securing a level playing field for investment, boosting human capital, and expanding social protection through increased generosity and coverage in a major welfare program, according to the IMF.
“The program aims to build on the hard-won macroeconomic stability achieved over the past year by further strengthening public finances, reducing inflation, rebuilding external buffers, and removing economic distortions to promote 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 up to a 25% increase in government employees’ salaries and setting an ambitious tax collection target.
The Finance Minister stated that Pakistan aims to collect Rs13 trillion ($44 billion) in taxes, which would represent a 40% increase from the current fiscal year.
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