China withdraws $2.4 billion in loans over two years: Gift

 by web desk

China withdraws $2.4 billion in loans over two years: Gift

Finance Minister Ishaq Dar said on Thursday that China's Export-Import (Exim) Bank was repaying $2.4 billion in loans over the next two years.

"China's EXIM Bank has rescheduled for 2 years the principal of the following loans totaling US$2.4 billion due in the next 2 fiscal years," he announced in a tweet.

The minister said the extension for this year is $1.2 billion and $1.2 billion for next year.

"Pakistan will pay interest only in both years," the finance minister said.

Last week, China agreed to restructure more than $2 billion of Pakistan's publicly guaranteed debt over a two-year period, providing major relief to the government, which is in the process of restoring foreign exchange reserves through new loans and rolling over maturing debt.

The Economic Coordination Committee (ECC) of the Cabinet has approved the revised terms of the agreement reached between Islamabad and Beijing, according to senior Pakistani officials.

Time and again, China has helped Pakistan meet its debt obligations by providing new loans and transferring existing debt. China refinanced $1.3 billion of its commercial loans early in June, helping Pakistan avoid defaulting on its international debt obligations during a period when the International Monetary Fund program was suspended.

Following the signing of the new IMF program, Pakistan's gross official foreign exchange reserves have returned to $8.7 billion – from a critically low level of $4.5 billion before the IMF deal.

International Monetary Fund IMF criticizes the State Bank of Pakistan (SBP) for the inflation curve.

 by web desk

International Monetary Fund IMF criticizes the State Bank of Pakistan (SBP) for the inflation curve

The International Monetary Fund (IMF) has slammed the State Bank of Pakistan (SBP) for its delayed response in dealing with inflationary pressures from 2020, saying monetary policy has fallen behind the curve. Following the approval of the US$3 billion standby program for Pakistan, the IMF staff report highlighted that the SBP's loose monetary policy conditions and several pauses in the rate tightening cycle had contributed to unanchored inflation expectations, resulting in five-decade high inflation.

To combat persistent inflation, the IMF urged the SBP to maintain a tight, proactive and data-driven monetary policy. The recent hike in key interest rates has been welcomed, but further tightening may be necessary to reduce inflation and achieve the SBP's medium-term inflation targets. The IMF emphasized the need for stronger independence of the SBP and the gradual introduction of refinancing schemes to improve the traction and transparency of monetary policy.

While some authorities remained optimistic about the easing of inflationary pressures, the IMF forecast increased inflation, mainly due to delayed monetary tightening measures. The report said inflation is expected to remain above 25 percent in FY24, with a gradual slowdown in subsequent years.

In the past six months, rising food prices, exchange rate depreciation and a lack of supply have contributed to soaring inflation, which has greatly affected the vulnerable population. The SBP's actions were perceived as lacking clarity, with rate hikes occurring sporadically.

Experts have acknowledged the stubborn nature of inflation in Pakistan, attributing it to various factors such as depreciation, supply shocks caused by natural disasters such as floods, fiscal slippages and delayed responses to monetary policy tightening. To effectively deal with inflation, they suggested maintaining a real positive interest rate and solving fiscal and administrative problems along with a focus on expenditure management, productivity and economic efficiency.

It is clear that controlling inflation requires a comprehensive and innovative approach involving both monetary and fiscal measures to stabilize the economy and protect people's well-being.