Business

Pakistan, China sign $2.3b loan facility agreement

Published

2 years ago

Farwa

Finance Minister Miftah Ismail announces deal on Twitter.
He reveals inflows are expected within a couple of days.
“We thank Chinese govt for facilitating transaction,” Miftah says.

ISLAMABAD: Pakistan on Wednesday signed a RMB 15 billion ($2.3 billion) loan facility agreement with a Chinese consortium of banks which is expected to aid the depleting foreign exchange reserves and depreciation of the local currency.

Finance Minister Miftah Ismail announced the development on his Twitter handle, revealing that the inflows are expected within a couple of days.

The Chinese consortium of banks has today signed the RMB 15 billion (~$2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday. Inflow is expected within a couple of days. We thank the Chinese government for facilitating this transaction.
— Miftah Ismail (@MiftahIsmail) June 22, 2022

“We thank the Chinese government for facilitating this transaction,” he said.

The agreement with Chinese banks is expected to bolster the country’s reserves and enable it to make import payments while lending some support to the rupee as well which has lost over 34% since the start of the outgoing fiscal year 2021-22.

The development comes as a massive relief to economic policymakers after foreign exchange reserves held by the State Bank of Pakistan (SBP) fell below $9 billion as of June 10, with the level staying at less than six weeks of import cover.

The news also came as a lifeline with the country already facing an uncertain economic situation as it remains engaged in talks with the International Monetary Fund (IMF) over the revival of a stalled Extended Fund Facility.

Last night, Pakistan and the IMF evolved a broader agreement on the budget for the fiscal year 2022-23 to revise upward the Federal Board of Revenue (FBR) target and slash expenditures to achieve a revenue surplus in the next fiscal year.

Resident Representative to Pakistan Esther Perez Ruiz later said discussions between the IMF and Pakistan are underway and major progress has been made regarding the budget for the next fiscal year.

Earlier, this month Miftah had announced that Chinese banks have agreed to refinance Pakistan with $2.3 billion worth of funds which will “shore up Pakistan’s foreign exchange reserves.”

Good News: The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about US$ 2.3 billion) have been agreed. Inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves.
— Miftah Ismail (@MiftahIsmail) June 2, 2022

Taking to his Twitter handle, Miftah wrote: “Good news. The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about $2.3 billion) have been agreed.”

Business

Gold prices in Pakistan approach an all-time high.

Published

19 hours ago

Farwa

Following a substantial surge the prior day, gold prices in Pakistan are ascending to unprecedented levels with an additional gain on Thursday, coinciding with a rise in global precious metal rates.

The price of 24-karat gold in the local market rose by Rs700 per tola, reaching Rs277,900, as reported by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).

Likewise, the cost of 10 grams of 24-karat gold increased by Rs600, currently priced at Rs238,254.

Globally, gold prices exhibited an upward trend, increasing by $7 throughout the day. The APGJSA reports that the international gold price was $2,682 per ounce.

Notwithstanding the increase in gold prices, the silver market exhibited stability, with the price of silver maintained at Rs3,050 per tola.

In the previous month, gold prices in Pakistan reached an unprecedented high of Rs 277,000 a tola, driven by substantial gains in the worldwide market.

Business

World Bank: Power industry subsidies soar by 400% in just five years.

Published

19 hours ago

Farwa

Ninety-four percent of domestic customers will benefit from the budgetary subsidy in 2024, according to a World Bank report, which credits the increase in protected consumers with contributing to the weight of subsidies.

In the current fiscal year, the electricity sector subsidy has increased by an astounding Rs. 954 billion, from Rs. 236 billion in the 2020 fiscal year to Rs. 1190 billion.

Notwithstanding changes, the circular debt has averaged Rs. 400 billion yearly over the last four years due to the incapacity to minimize losses and inadequate recovery of electricity payments.

According to the World Bank, the government must solve the fundamental problems in the power industry in order to lower the burden of subsidies and circular debt, as rising electricity prices and inadequate tax collection will only serve to worsen the circular debt crisis.

The rise in Pakistan’s power sector circular debt has raised worries from the World Bank (WB) despite an unprecedented increase in energy pricing.

Within the last six years, the debt has grown by 1241 billion rupees, according to the World Bank’s study. Between 2019 and 2021, the debt climbed by 1128 billion rupees.

The electricity sector’s circular debt has been increasing at an alarming rate, according to a World Bank analysis. Between 2022 and 2024, there was a substantial increase of 113 billion rupees.

Pakistan’s electricity industry has 2393 billion rupees in total circular debt as of 2024.

Restructuring is required to solve the circular debt issue, according to the World Bank.

Business

Final settlement: Govt to pay five IPPs Rs 72 billion.

Published

20 hours ago

Farwa

On October 10, Prime Minister (PM) Shehbaz Sharif declared that the agreements with five IPPS would be terminated in the first phase. Sources claim that the government will give Rs 15.5 billion to Rousch Power and Rs 36.5 billion to Hubco.

In a same vein, the federal government would pay Lalpir Power Rs 12.8 billion, Atlas Power Rs 15.5 billion, and Sapphire Power Rs 6 billion.

The sources state that late payment fees are not included in the settlement. With effect from October 1, the agreements with the five IPPs will be considered officially ended.

PM Shehbaz earlier remarked that the termination was carried out with the owners of the IPPs’ mutual permission while presiding over the federal cabinet meeting in Islamabad.

The Prime Minister notified the Cabinet that the only money that will be paid, interest-free, to these IPPs is the outstanding balance.

According to him, the national exchequer will gain over 411 billion rupees from the termination of these contracts, while power customers will save roughly sixty billion rupees.

According to Prime Minister Shehbaz Sharif, it was the result of the arduous teamwork of the entire government. In this regard, he also acknowledged the contributions and assistance of the associated parties. He specifically mentioned General Asim Munir, the Chief of Army Staff, who showed a personal interest in the situation.

The prime minister characterized the development as the start of a trip that will ultimately lead to the advancement and prosperity of the populace.

PM Shehbaz Sharif also brought up the assistance that the Punjabi and Federal governments gave to power users over the summer.