China to lend $2 billion for bolstering Pakistan’s foreign exchange reserves: Report

The $2 billion loan being pledged by China is to avoid further devaluation of the rupee against the greenback

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LAHORE: In a largely expected development, China will lend around $2 billion to bolster Pakistan’s foreign exchange reserves and avert further depreciation of the rupee against the greenback.

The Financial Times on Tuesday reported that two senior government officials informed China would be providing Pakistan $2 billion for preventing further devaluation of the rupee against the dollar and bolster its dwindling forex reserves.

A senior government official In Islamabad said, “China’s promise to Pakistan is an indication of their commitment to help us avoid a crisis. If the rupee falls sharply and we need to prevent its slide, we can turn to China.”

According to the report, China isn’t officially announcing the financial support being extended by it to Pakistan as the government faces high debt repayments, fiscal deterioration and sliding forex reserves.

Moreover, an English daily last month had reported China doesn’t want Pakistan to highlight its help for bolstering the country’s foreign exchange reserves.

The rupee has cumulatively depreciated by approximately 26% since January 2018 and the negotiations with the International Monetary Fund (IMF) regarding a potential bailout programme are set to resume later on this month.

In December, United Arab Emirates (UAE) pledged to park $3 billion in the State Bank of Pakistan after Saudi Arabia’s decision to extend $3 billion to Pakistan in October last year.

Profit in mid-December reported Pakistan may obtain at least $2 billion short-term loans from China after the conclusion of the Joint Coordination Committee (JCC) meeting in Beijing.

It was stated a short-term lending arrangement could be arranged with the Industrial and Commercial Bank of China (ICBC), according to the report.

According to sources at State Bank of Pakistan (SBP), during the visit of Prime Minister Imran Khan in November, the central bank was asked for a ‘situation analysis’ for the requested financial assistance.

The bank had reportedly finalised the report which was also to be discussed during the JCC meeting held in December last month.

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