Pakistan in talks with China for another $2 bn deposits

ISLAMABAD: After the United Arab Emirates ‘polite refusal’ to grant over $3 billion oil on deferred payment, Pakistan has geared up efforts to secure another $2 billion deposits from China with the possibility of finalisation of arrangement this month.

Top official sources confirmed to The News on Friday that details of financing arrangement with China were being worked out and reaching finalisation of agreement within couple of weeks. It is hoped that $2 billion facility will become a reality soon.

This reporter talked to several officials of different ministries and relevant departments to ascertain reasons for the UAE’s reluctance to grant over $3 billion oil facility on deferred payment and know about the government’s strategy to cope with the situation.

Pakistan will have to make heavy repayments on foreign loans and bonds in remaining months of the current fiscal year so dollar inflows are must to jack up foreign currency reserves held by the SBP.

“We will give you surprise,” said one top official of government when this reporter asked about possible rate of 6 to 7 percent on proposed China’s deposits. Earlier, China had linked deposits of $2 billion facility with Shanghai Interbank Offered Rates (SHIBOR). Beijing was intended to provide this facility in Yuan and then it would be converted into US dollar.

“Any deposit facility less than 5 percent will be wonderful for the country at this juncture,” said official sources adding that guarantees were being finalised and then final rate on these deposits would be worked out probably within next few days.

China had already provided $2 billion deposits to the SBP in July 2018-19 soon after the last general elections but before formation of the PTI-led government. On polite refusal of UAE for granting $3 billion oil facility on deferred payment, official sources said first the UAE was not ready to provide anything; however, at the highest level, the UAE authorities were pursued and requested to “match” with the Saudi package.

According to sources, there was no written agreement so after a lot of persuasion and backdoor diplomatic efforts, the UAE agreed to sign deposit of $1 billion at first stage but later on they had so signed remaining $2 billion out of which $1 billion was received and the last tranche of $1 billion was expected to be received next week.

“There was no written agreement on oil facility on deferred payment with the UAE,” said the sources adding that when they were requested to match their package with Saudi Arabia’s, they sought a copy of agreement related to this facility from Pakistani authorities with the promise to look into this matter. But our expectations should be close to realities, added the sources.

The package obtained from Saudi Arabia requires to look into different prospective because they consider geo-political situation as pre-requisite for taking such decisions but in case of the UAE their consideration was entirely different.

Pakistan’s closing relations with Qatar might have become the reason for this polite denial but no one was sure about the exact causes. Ministry of Finance Advisor and Spokesman Dr Khaqan Najeeb told this reporter that $3.2 billion Saudi oil deferred facility was being operationalised and all relevant agreements were in place.

Dr Najeeb further said the ITFC deferred facility had already been operationalised, which will offset any impact of a delay or unavailability of the UAE facility. The government has worked diligently to ensure that $1 billion of ITFC will be utilized in this fiscal year.

In addition, he said adequate financing is in place for the current fiscal year and beyond. The government continues to follow a multipronged strategy to ensure continued stability in the country’s balance of payment (BOP) position. The strategy has included attracting more foreign direct investment, sale of assets and bilateral and multilateral flows, said Dr Khaqan Najeeb.

The government, he said, had also launched Pakistan Banao certificate, a first ever retail offering to Pakistanis abroad. The government is also working on diversifying its investor base through issuance of a Panda bond. In addition to arranging adequate financing, bringing down the current account deficit is a key component of the strategy of BOP management, he concluded.