China lends $1 billion to Pakistan to boost plummeting FX reserves

[SunilM]

China lends $1 billion to Pakistan to boost plummeting FX reserves

BUSINESS NEWS
JUNE 30, 2018

ISLAMABAD (Reuters) - China has lent Pakistan $1 billion to boost the South Asian country’s plummeting foreign currency reserves, two sources in Pakistan’s finance ministry told Reuters, amid growing speculation of another International Monetary Fund bailout.

The latest loan highlights Islamabad’s growing dependence on Chinese loans to buffer its foreign currency reserves, which plunged to $9.66 billion last week from $16.4 billion in May 2017.


The lending is the outcome of negotiations for loans worth $1-$2 billion that was first reported by Reuters in late May, the two sources told Reuters.

“Yes, it is with us,” said one finance ministry source, in reference to the Chinese money. The second source added that the “matter stands complete”.

The finance ministry spokesperson did not respond to a Reuters request for comment.


With the latest loan, China’s lending to Pakistan in this fiscal year ending in June is set to breach $5 billion.

In the first 10 months of the fiscal year China lent Pakistan $1.5 billion in bilateral loans, according to a finance ministry document seen by Reuters. During this period Pakistan also received $2.9 billion in commercial bank loans mostly from Chinese banks, ministry officials told Reuters.

Beijing’s attempts to prop up Pakistan’s economy follow a strengthening of ties in the wake of China’s pledge to fund badly-needed power and road infrastructure as part of the $57 billion China-Pakistan Economic Corridor (CPEC), an important cog in Beijing’s vast Belt and Road initiative.


But analysts say China’s help will not be enough and predict that after the July 25 national election the new administration will likely seek Pakistan’s second bailout since 2013, when it received a package worth $6.7 billion from the IMF.

“Looking at the current scenario, it is likely after the new government comes in that they will go to the IMF,” said Suleman Maniya, head of research at local brokerage house Shajar Capital.

Reporting by Drazen Jorgic; Editing by Ros Russell

https://www.reuters.com/article/us-...-plummeting-fx-reserves-sources-idUSKBN1JQ0TV

Monthly drip feeding by IRON BROTHER.

 

[SirHatesALot]

Congratulations

 

[SunilM]

It clears some doubt. I was wondering how the Interim government was able to keep the Reserves at 10 Billion for the first three weeks of it taking over. This clears it. It also however means that the amount of 1 Billion dollars has already been adjusted/used. Lets see how much SBI gets from the Tax amnesty scheme, the results should come out in the next week. But will OIL PRICES being this high, the next four weeks are going to be tough for Pakistan.

 

[Skull and Bones]

So out of 9 billion in forex, 5 billion is loan from China?

 

[SunilM]

So out of 9 billion in forex, 5 billion is loan from China?

No, the 5-6 Billion dollars have already been used up for debt repayment and funding the current account deficit. You see Pakistan needs atleast two billion dollars of forex funding every month to keep afloat. They are given around 1 to 1.5 Billion by China and other amounts they try to manage from some where else or by using their forex reserve. You must also keep in mind that the true forex reserve with the SBP is less than 4 billion dollars now i.e 9.6. - 6 - 3.6 billion dollars. SBP took a loan from the commercial banks for the same amount through forward contracts and the same cant be used for debt repayment, because that amount belongs to the general public. So you see the situation is extremely prcarious. They have a import cover of less than 1 month. Iron Brother will drip feed them till the next government takes over which will then negotiate with the IMF. THeir external loans have now reached an alarming lever of 96 billion dollars, and will cross 100 billion dollars by Setermber 2018.

And you can gauge the desperation from the fact that the Government is thinking of extending the amnesty scheme till Septerm 30, 2018 inorder to get dollars to stay afloat. All the thughs/thieves/tax evaders are having a good time where they have to pay 2 to 5% of the amount and get to keep the rest of the amount parked outside the country. And you wonder why they are in the predicament they are.

 

[HAIDER]

hostile takerover ...

 

[SunilM]

hostile takerover ...

By whom is the million dollar question!!

 

[El Sidd]

Fascinating

 

[SunilM]

And just look at the effect of devaluation,

"The caretaker government of Pakistan on Saturday revised prices of petroleum products for the second time in a month, following the increase in the price of crude oil in the global oil market.

The new price of Petrol has been set at Rs99.50 after an increase of Rs7.54 per litre for the month of July, while the revised price of Diesel is Rs119.31 after an increase of Rs14."

https://en.dailypakistan.com.pk/headline/petrol-price-raised-to-rs99-50-diesel-rs119-31/

And there is more devaluation to come. seek Pakistan Rupee at Rs 130 by the end of August 2018. The inflation is surely going to cross 10 % NOW.

 

[Dalit]

Always amused by Indian obsession with Pak economy. It must be out of goodwill.

 

[Chakar The Great]

Haha what surprises me is the indian worries and their expert opinions on Pakistan's economy and load management. Do you guys have nothing else to do?? How is China lending loan a matter of concern for India??

I get it, you are ignored so badly in india that you have nothing else to do out of hate driven hinduvata ideology and come here to vomit everything.

 

[SunilM]

It is important to discuss these issues. They say the forewarned is forearmed.Lets see what the Sri Lanks have to say about China

China can be a “big bully,” says top bureaucrat

By Sunimalee Dias
View(s): 32
A top bureaucrat this week insisted that the stalling of talks between Sri Lanka and China authorities was inevitable since giving in would hurt Colombo in the long run and cited Beijing as a “big bully” in this respect.

Export Development Board Chairperson Indira Malwatte in an interview with the Business Times on Thursday at her office in Colombo said that “They (China) will try to be a big bully as much as possible” in trying to get the deal on the Free Trade Agreement (FTA) between the two nations more favourable to them.

She explained, “Sri Lanka did not agree to the time period to reduce the import duties for 10-20 years since that could have affected Sri Lanka.”

Under the FTA if this is agreed upon it could affect the local industries in Sri Lanka, Ms. Malwatte noted adding that in this respect the government has plans to have a trade adjustment package.

This trade adjustment package would ensure that the local industries would be assisted so that they would not be affected by this type of trade deal but noted that this would take time.

The Chairperson insisted, “We cannot give in just because we are in debt,” adding that Sri Lanka currently owes China money as it has been involved in a number of key infrastructure projects in the country having built ports, roads and power stations.

On the other hand the trade agreement with India is moving, she said adding that “We have to look outside and take advantage of Asia’s growth.”

With the fast increasing middle income group in Asia countries like Sri Lanka need to take to bilateral arrangements with Asian states and in this context give confidence to exporters and buyers that we need the FTA.

Sri Lanka’s Asia focus has led to talks for trade with India, Pakistan, Singapore and negotiations are also underway with Thailand, Korea and Malaysia.

Moreover, with remittances reducing despite a slight increase last year, Ms. Malwatte explained that in a bid to service debts the country needs to do so through its revenues from exports.

“We have become a nation of consumption and not a manufacturing nation,” the chairperson stated adding that a conducive environment and political stability were crucial for the advancement of the economy.

In this respect, the National Export Strategy (NES) would help to reap the full benefits of exports and increase its earnings through diversified exports in boat building, wellness tourism, electrical and electronics, IT-BPM, spices and concentrates, processed food and beverages.

“I don’t think we have had such an extensive strategy policy done,” previously for exports with even the private sector being actively involved with the EDB, she explained.

Ms. Malwatte also explained that Sri Lanka needs to link up with the value chains of the world to become part of the total manufacturing product.

She insisted that the board requires a further boost by increasing the salaries of its staff in line with the private sector as it had once been in the past under the Ministerial leadership of the late Lalith Athulathmudali.

She also had issues about the bureaucracy in the public service noting “There has to be a process to any madness” adding that there had been about 50 appointments made since she assumed office that was possible by doing follow-ups; but insisted no ministerial interference was allowed into her department.

http://www.sundaytimes.lk/180701/bu...e-a-big-bully-says-top-bureaucrat-300061.html

You took money from America and served their interests and look where you are today. With China you singned an FTA which led to a huge trade imbalance. Infact, their vice like grip on you is so complete that Pakistan will never have any manufacturing base of their own, You will provide raw material for them. And you are addicted to loans and can't survive without it. These are very interesting developments indeed.

 

[Dalit]

It is important to discuss these issues. They say the forewarned is forearmed.Lets see what the Sri Lanks have to say about China

China can be a “big bully,” says top bureaucrat

By Sunimalee Dias
View(s): 32
A top bureaucrat this week insisted that the stalling of talks between Sri Lanka and China authorities was inevitable since giving in would hurt Colombo in the long run and cited Beijing as a “big bully” in this respect.

Export Development Board Chairperson Indira Malwatte in an interview with the Business Times on Thursday at her office in Colombo said that “They (China) will try to be a big bully as much as possible” in trying to get the deal on the Free Trade Agreement (FTA) between the two nations more favourable to them.

She explained, “Sri Lanka did not agree to the time period to reduce the import duties for 10-20 years since that could have affected Sri Lanka.”

Under the FTA if this is agreed upon it could affect the local industries in Sri Lanka, Ms. Malwatte noted adding that in this respect the government has plans to have a trade adjustment package.

This trade adjustment package would ensure that the local industries would be assisted so that they would not be affected by this type of trade deal but noted that this would take time.

The Chairperson insisted, “We cannot give in just because we are in debt,” adding that Sri Lanka currently owes China money as it has been involved in a number of key infrastructure projects in the country having built ports, roads and power stations.

On the other hand the trade agreement with India is moving, she said adding that “We have to look outside and take advantage of Asia’s growth.”

With the fast increasing middle income group in Asia countries like Sri Lanka need to take to bilateral arrangements with Asian states and in this context give confidence to exporters and buyers that we need the FTA.

Sri Lanka’s Asia focus has led to talks for trade with India, Pakistan, Singapore and negotiations are also underway with Thailand, Korea and Malaysia.

Moreover, with remittances reducing despite a slight increase last year, Ms. Malwatte explained that in a bid to service debts the country needs to do so through its revenues from exports.

“We have become a nation of consumption and not a manufacturing nation,” the chairperson stated adding that a conducive environment and political stability were crucial for the advancement of the economy.

In this respect, the National Export Strategy (NES) would help to reap the full benefits of exports and increase its earnings through diversified exports in boat building, wellness tourism, electrical and electronics, IT-BPM, spices and concentrates, processed food and beverages.

“I don’t think we have had such an extensive strategy policy done,” previously for exports with even the private sector being actively involved with the EDB, she explained.

Ms. Malwatte also explained that Sri Lanka needs to link up with the value chains of the world to become part of the total manufacturing product.

She insisted that the board requires a further boost by increasing the salaries of its staff in line with the private sector as it had once been in the past under the Ministerial leadership of the late Lalith Athulathmudali.

She also had issues about the bureaucracy in the public service noting “There has to be a process to any madness” adding that there had been about 50 appointments made since she assumed office that was possible by doing follow-ups; but insisted no ministerial interference was allowed into her department.

http://www.sundaytimes.lk/180701/bu...e-a-big-bully-says-top-bureaucrat-300061.html

You took money from America and served their interests and look where you are today. With China you singned an FTA which led to a huge trade imbalance. Infact, their vice like grip on you is so complete that Pakistan will never have any manufacturing base of their own, You will provide raw material for them. And you are addicted to loans and can't survive without it. These are very interesting developments indeed.

There is no need for you to be worried about Pakistan. We will handle our own matters.

FYI, China Pak relations are here to stay. No matter how irked and angry India and the US are about this relationship.

 

[Dalit]

But i ll forgive him , he gets paid for these trolls. He has to survive, its not easy living in worlds largest slum especially during monsoon season.

We will forgive this donkey. He has got to make a living. Be it by being a RSS troll. What a humiliation.

 

[SunilM]

it is because Punjab province which is a useless piece of garbage which contributes zero to Pakistan's economy and only burdens pakistan with its population gets all the government investment and funding which the financial capital of pakistan, karachi gets zero funding and infrastructural development.

Punjab only produces wheat and for it, it gets to have lions share of Pakistan's wealth because of its big population, resource rich provinces like balochistan, sindh, KPK still living in stone age, with zero investment in their infrastructure. there is a big security situation in all the money generating provinces of Pakistan, sarkar uses terrorists to destabilise the law and order in these areas while Punjab province remains stable even though all banned outfits spring from there.

there was karachi beggar project of Karachi circular railway through which is nothing but begging for some infrastructure investment and even that project was stalled by racist Punjab centric establishment and federal government of Pakistan.

if Pakistani government retains its punjab centric policy, this is bound to happen.

The sad part is most members here are still busy Discussing PMLN's future in the Economics thread rather than the bleak economic situation facing the country.