China, Saudi Arabia to contribute $13bn finance package: Dar

Islamabad: China and Saudi Arabia have promised to provide a $13 billion financial package to Pakistan for the current fiscal year 2022-23, with China promising $8.8 billion and Saudi Arabia pledging $4.2 billion.

In accordance with the IMF deal, this comes on top of the rollover of sovereign loan deposits, more rollovers, commercial loans, extra SWAPS, and the jacking up of deferred payment oil facilities.

The State Bank of Pakistan’s foreign currency reserves is currently $8.9 billion. Therefore both financial packages will help the country’s suffering economy.

When Pakistani delegations led by Prime Minister Shehbaz Sharif visited China and Saudi Arabia, they were assured that both countries would meet Pakistan’s financial needs until June 2023. A small group of media was invited into Finance Minister Ishaq Dar’s office on Friday, where he announced that the real effective exchange rate (REER) of the rupee versus the US dollar has dropped to Rs. 190.

A Chinese minister indicated that China had promised Pakistan that it would renew $4 billion in sovereign rollover deposits on all upcoming maturities. He also added that the Chinese government promised $3.3 billion in commercial loans. He added that China had approved an increase in the SWAPS amount, bringing the entire Chinese package for the current fiscal year to $8.8 billion. According to him, the Bank of China has lent $200 million.

Dar stated that Pakistan and China agreed to revive the $9.8 billion Mainline-1 project, which will run from Karachi to Peshawar. The Karachi Circular Railway, he said, will also receive funding from China (KCR). His estimation places the increase in ML-1’s price tag from $6.3 billion to $9.8 billion squarely on the PTI government’s shoulders. The PML-N leader, Nawaz Sharif, is claimed to have received special attention from the Chinese president and prime minister, who both took an interest in his health, according to the minister.

The minister revealed that the conclusion of the Saudi visit included an assurance that the Saudis would evaluate Pakistan’s request for an increase of $3 billion in deposits and an increase of $1.2 billion in the oil facility on deferred payment. Furthermore, KSA officials would contemplate an additional $4.2 billion.

As he continued, he announced that the Kingdom of Saudi Arabia would extend its oil facility of $1.2 billion on deferred payment ($100 million monthly basis) until June 2023 and that it would roll over current deposits of $3 billion. As a result, Saudi Arabia’s contribution is projected to reach $8.4 billion. The minister responded to another question by saying that Saudi Crown Prince Muhammad Bin Salman would be visiting Pakistan this month.

He also stated that the Saudis would invest around $11 to $12 billion to build a Petrochemical Complex in Gwadar. Since Gwadar lacked the necessary infrastructure in 2015, when it was agreed that it would build an oil refinery at an estimated cost of $6 billion, he had proposed to build it in Hub instead.

As for investment options, he said the government was considering selling RLNG-based power projects to KSA, among other things. For the ADB’s $1.5 billion BRACE initiative, Dar said $500 million in co-financing from the Asian Infrastructure Investment Bank (AIIB) was anticipated to be approved this month.

He also announced that the government would hold a meeting of the National Tax Council the following week to approve the GST harmonization on goods and services between the Centre and the provinces. This is the only remaining hurdle to the approval of the World Bank’s $450 million RISE program.

Another 500 million dollars in loan money was set aside for Sindh, bringing the total amount of money set aside by the WB to be disbursed to the region to about $1.4 billion, with the release of that money contingent on the successful harmonization of GST across all commodities and services.