China rolls over $2bn loan for a year

China rolls over $2bn loan for a year

Islamabad/Karachi: China issued 2 billion loans amid dwindling foreign exchange reserves. Pakistan’s troubled currency, which previously closed at 229 to 240.50 on Tuesday, rebounded as it rose 11.50 rupees It appeared to have power. Some stock exchanges reportedly panicked and sold the dollar for just 218 rupees.

“China has extended his three SAFE deposits. First $500 million deposit June 27, 2022, second $500 million deposit June 29, 2022, third ‘s $1 billion deposit was July 23, 2022. China’s State Administration of Foreign Exchange (SAFE) deposits of $2 billion have been carried forward for a year,” a senior Treasury official confirmed Wednesday and told the news here. Which includes US$2.3 billion in commercial loans and the current US$2 billion in SAFE deposits, enabling Islamabad to close the financial year by closing the external funding gap. $35.9 billion.

The IMF has indicated that it may hold an interim Board meeting scheduled by the end of August 2022, if sufficient financial commitments are confirmed.

Pakistani officials, however, are awaiting confirmation from friendly countries, notably the Kingdom of Saudi Arabia (KSA), Qatar and the United Arab Emirates, that the IMF has confirmed that his $4 billion and his $35.9 billion filling the funding gap.

Saudi Arabia was able to confirm that the oil rig was jacked up in her US$1.2 billion deferred payment, bringing the total value of the oil rig to her US$2.4 billion. Pakistan and the IMF are also discussing the possibility of converting 1 billion Special Drawing Rights (SDRs) into US dollars for Islamabad. However, this conversion of SDR plants is only an option that requires developing mechanisms, which could take some time.

The United Arab Emirates may show interest in acquiring stakes in state-owned enterprises (SOEs), particularly in the oil and gas sector, but such a trade deal could take months to materialize. A potential gas and RLNG with deferred payments from Qatar could soon materialize if negotiations on the matter are ongoing. Selling RLNG power plants to friendly nations will also take time, but could bring in $2 billion to $3 billion in the national coffers.

All of these developments occurred at a time when foreign exchange reserves were rapidly depleting. Foreign exchange reserves held by the National Bank of Pakistan had reached US$20 billion as of August 2021, but by 22 July 2022 he had dwindled to US$8.5 billion. In the week ended 22 July 2022, SBP’s reserves decreased by $754 million to $8.5 billion due to external debt and other payments.

On the other hand, Pak’s currency appears not to have given up the fight, and has so far been buoyed by an increase in the influx of exporters and a decline in import payments, in hopes that the beleaguered country is nearing relief. recorded the largest daily profit in International Monetary Fund boosting sentiment.

Rs rose to its highest level in almost two weeks. Local currency units closed at 228.80 to the dollar, compared with the previous day’s close of 238.38. 9.6 rupees higher, a record increase in absolute value. The 4.19% gain per day was the rupee’s best performance since 1999. The rupee fell 14.4% in July, its biggest monthly decline since 1972. He has fallen 23% this year, weighed down by shrinking foreign exchange reserves and concerns about delays in the IMF’s lending program due to domestic political unrest.

The National Bank of Pakistan’s foreign exchange reserves have fallen from $9.8 billion in June 2022 to $8.6 billion as of July 22. Reserves are sufficient to cover almost six weeks of imports.

Analysts at said they expected a positive statement from the International Monetary Fund, weak demand for the dollar from importers to make payments, and anticipation of a further rise in the rupee in the coming days. said the high interest in the sale of the company all contributed to its having trouble with support. currency. “Confidence-inspiring comments from the IMF team boosted sentiment and significantly boosted exporters’ dollar selling,” said Komal Mansour, head of research at Tresmark, a web-based financial markets terminal. rice field.

The latest trade data eased pressure on the rupee and improved the country’s weak current account outlook. The country’s trade deficit fell 47% to he $2.6 billion in July on the back of falling imports. Total imports for July 2022 fell to $4.9 billion from $7.9 billion the previous month, the Pakistan Bureau of Statistics reported. The decline in imports is due to bans on some items and lower oil imports.

Islamabad-based IMF President Esther Perez Ruiz said Pakistan has completed early measures combined with the seventh and eighth review of the expanded fund facility after the July 31 petroleum exploration tax hike. He said it had boosted investor confidence in stabilizing the economy.

However, the IMF is set to take place in late August, confirming that Saudi Arabia and the United Arab Emirates will provide the country with his expected $4 billion loan after the IMF releases a tranche. Linked to the board meeting of Analysts expect the rupee to continue rising in the coming days. “The rupee is likely to continue its upward trend on expected inflows from the IMF and foreign aid from friendly countries.

Improving the current account deficit amid declining imports will help the rupee continue to appreciate in the coming days,” said Tahir Abbas, head of research at Arif Habib Limited. “We expect the current account deficit to decrease to $300 million to $400 million in July, compared to $2.2 billion in June,” Tahir added.

Meanwhile, the National Bank of Pakistan has clamped down on currency exchanges and banks to stem the depreciation of the rupee and ensure the availability of foreign currency in the market. “Considering the recent volatility of exchange rates and the difference between the interbank rate and the rate offered by exchange companies (ECs) and banks to their customers, the State Bank of Pakistan (SBP) has decided to increase the supervision of foreign exchange transactions by ECs. and banks,” it said in a statement.

In this regard, since Monday (01/08/2022), the SBP has initiated inspections of a number of exchanges and banks. On Tuesday (02/08/2022), SBP suspended four branches of two ECs (Galaxy Exchange Co and Al-Hameed International Money Exchange Co) for violating SBP regulations.

SBP has also recently fined some ECs. Also, 13 franchise agreements were recently terminated due to violations of SBP orders from 6 different ECs.

“The SBP has also launched a mystery shopping exercise across Pakistan to investigate concerns that some ECs are not selling foreign currency to their customers. I was summoned on the 4th of May,” he said. “If necessary, the SBP will step up enforcement action against ECs and banks in the light of ongoing inspections and mystery shopping results.”

Credit/Source : THENEWSPK

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