Pakistan gets $700m private bank loan

ISLAMABAD: Pakistan has obtained $700 million loan from private commercial international bank at the rate of 4.47 percent in a bid to build up dwindling foreign currency reserves just ahead of closing of financial year 2016-17.

“Yes, we have raised $700 million through commercial borrowing in order to shore up foreign currency reserves just ahead of ending of financial year on June 30, 2017,” official sources confirmed to The News here on Thursday.

The World Bank (WB), the sources said, provided guarantee for this $700 million commercial borrowing. Initially, the private international commercial bank had offered interest rate of around 06 percent, but after tough parleys the rate was reduced to below 05 percent. The government had already raised around $600 million through commercial borrowings from Chinese banks in the outgoing financial year. Such kind of borrowing is considered easy one as it does not require meeting any Public Procurement Regulatory Authority (PPRA) rules making it easy to accomplish the criteria for getting commercial loans.

Under the IMF programme, the government had used avenue of commercial borrowings for meeting conditions related to net international reserves (NIR).

In the wake of rising current account deficit, which had already touched over $9.5 billion so far, it would be hard for the government to avoid depletion of foreign currency reserves. The trade deficit had widened manifold and would be estimated around $32 billion by the end of the financial year, so the government was making efforts to manage the pressure on external account.   

Pakistan’s total liquid foreign reserves stood at $21.358 billion on June 23, 2017. The foreign reserves held by the State Bank of Pakistan was standing at $16.376 billion while Net foreign reserves held by commercial banks stood at $4.982 billion.

During the week ending June 23, 2017, SBP’s reserves increased by $955 million to $16,376 million, due to official inflows, including $622 million from ADB and $106 million from the World Bank.