LAHORE: As inflows from traditional lenders are expected to fall below budgeted projections, Pakistan has initiated talks with a Chinese financial institution to obtain a $1 billion foreign commercial loan, reported a private news outlet.
Due to deteriorating macroeconomic indicators in the past one year, the World Bank (WB) and Asian Development Bank (ADB) have withheld loans amounting to $700 million.
The country has already taken a $1 billion loan from Industrial and Commercial Bank of China (ICBC) in the past three months. During the last one year the government has borrowed around $2.3 billion from Chinese financial institution and in addition to the upcoming loan the government is to receive $200 million immediately from China to support its rapidly diminishing foreign currency reserves, reported the private news outlet.
According to reports the cost of borrowing is expected to be more than 5 per cent due to an increase in the London Interbank Offered Rate (LIBOR).
Last month, the government called off a $1 billion Eurobond as financial advisers projected that the bond may cost the government more than 7.3 per cent.
According to the Ministry of Finance, the total financing requirements for the remainder of this fiscal year are $9.5 billion, on the basis of a possible $7 billion current account deficit and a $2.5 billion debt servicing cost. Total financing requirements for the fiscal year have also been revised up to $24billion from $17 billion.
