China’s ায়ন 2.3 billion refinancing plan in Pakistan amid foreign exchange crisis: report

China's ায়ন 2.3 billion refinancing plan in Pakistan amid foreign exchange crisis: report

Sino-Pakistani relations: China agrees to refinance Pakistan with ্যের 2.3 billion in funds

Islamabad:

China on Thursday agreed to refinance Pakistan with মূল 2.3 billion in funds amid the country’s declining foreign exchange reserves.

“Good news: Chinese banks have agreed to refinance RMB 15 billion deposits (approximately US $ 2.3 billion). Inflows are expected after some routine approvals from both sides. This will help increase our foreign exchange reserves,” Ismail tweeted.

The development depends on the government’s ability to finance the recovery of the country’s delayed International Monetary Fund (IMF) program to about 2.5 percent of GDP.

According to Geo News, quoting The News, revenue adjustments can be made in the next budget by increasing revenue and reducing expenditure.

To demonstrate its commitment to implementing the ‘reform agenda’, the Pakistani government needs to stop subsidizing petrol and diesel prices, increase base tariffs and fuel price adjustments by Rs 8 per unit, increase electricity tariffs and increase gas tariffs. 20 percent on average.

On Tuesday, Pakistan’s finance minister said a staff-level agreement with the IMF was expected to be signed by mid-June this year. This further indicates that the agreement is expected to be reached after the next budget announcement, in line with the objectives of the IMF program.

However, the IMF called for quick adjustment on the financial front to get the economy back on track. The announcement of the next budget for 2022-23 will pave the way for a stabilization process consistent with IMF policies, but here’s the catch-22 situation: the government will have to make tough decisions instead of spending resources to gain political support, Geo News quoted sources as saying.

In such a scenario, the IMF is asking the Federal Board of Revenue to jack up the tax collection target of PKR 7.5 trillion for the next budget and reduce development funds and subsidies.

Although the government wanted to keep the prices of petroleum products unchanged at existing levels from June 1, 2022, the burden will have to be borne by the consumers after the budget is announced.

Recent estimates show that despite the increase in the price of petroleum products by 30 PKR per liter, the subsidy on petrol still stands at PKR 39 per liter, up from PKR 17 per liter after the previous May 27 price hike.

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