Pakistan is in dire need of a three to five-year extension on the maturity of $12 billion in debt from Saudi Arabia, China, and the UAE to secure approval from the IMF’s Executive Board for a new bailout package, Finance Minister Mohammad Aurangzeb said on Sunday.
Upon his return from China, the finance minister said during a press conference that Pakistan is not seeking additional foreign loans but is requesting the re-profiling of existing foreign deposits. This includes $5 billion from Saudi Arabia, $4 billion from China, and $3 billion from the UAE.Â
He said that the IMF demanded external financing assurances for the 37-month period under the $7 billion Extended Fund Facility (EFF).
Pakistan had initially borrowed these funds for a period of one year and has been securing extensions due to an inability to repay. The current request to reschedule the debt for three to five years aims to reduce uncertainty at the time of loan maturities.
Of the $12 billion, $5 billion has already matured in July. Historically, these creditors have granted short-term extensions rather than longer tenors.
The minister also stated that Pakistan has begun the process of re-profiling debt from Chinese Independent Power Producers (IPPs), which totals $15.4 billion due by 2036. A Chinese consultant will be hired to assist in extending the debt maturity by five to eight years.
Aurangzeb emphasised that Pakistan is not seeking debt restructuring or reductions, but merely an extension of the maturity period for both foreign deposits and Chinese IPPs debt. He also mentioned China’s support for Pakistan’s efforts to meet IMF conditions and its assurance of assistance in securing IMF Executive Board approval.
Additionally, Pakistan is discussing a $600 million commercial loan from Chinese banks and plans to launch the Panda Bond, targeting $1 billion with an initial capitalization of $150 to $200 million.
The finance minister acknowledged the economic challenges posed by increased interest rates, electricity prices, and taxes, attributing these issues to past economic policies and the need to restore trust with the IMF. He stressed that seeking assistance from the IMF is currently Pakistan’s only viable option.
According to state-run news agency APP, the finance minister said that he also held discussions on different aspects of bilateral trade and economic cooperation including local energy requirements and launching of Panda bonds in the Chinese markets.
He said that China was ranked among the world’s biggest capital markets and Pakistan plans to issue these bonds to diversify its funding sources and strengthen its foreign exchange reserves by attracting Chinese investors.
