China, KSA, UAE roll over $12b Pak debt for one year

Finance Minister Muhammad Aurangzeb announced on Tuesday that three bilateral creditors have agreed to roll over the $12 billion debt for a year. The International Monetary Fund (IMF) is expected to approve Pakistan’s $7 billion rescue package on the 28th of this month.


There was no delay in the IMF Executive Board meeting, which will take place by the end of this month to approve the $7 billion Extended Fund Facility, Aurangzeb told reporters after a Senate Standing Committee on Finance meeting.

The Executive Board will convene on August 28th to ratify the $7 billion deal, according to government officials. The development puts an end to the uncertainty surrounding the schedule of the Executive Board meeting, which was dependent on the rollover of payments by Pakistan’s three main creditors.

Aurangzeb stated that the $12 billion cash deposits made by China, Saudi Arabia, and the United Arab Emirates (UAE) would be rolled over for a year, as was done previously. Earlier, he stated that the IMF had requested a three to five-year rollover before to the Executive Board meeting.

However, he explained on Tuesday that the obligation was to secure the rollover for one year, but the government was attempting to extend the rollovers for three to five years. He noted that the three bilateral creditors had agreed to renew the loans on the same terms and circumstances.

The IMF announced a staff-level agreement for $7 billion last month, subject to Executive Board approval and funding pledges from bilateral and multilateral creditors.

The finance minister stated that there was no purpose in requesting an increase in interest rates on these loans given that the country’s foreign exchange reserves have increased since a year ago. The IMF, he continued, had identified a $3-5 billion financing deficit over the three-year program duration, which was easily doable.

“Pakistan has also received an offer from a foreign commercial bank but we are waiting for the IMF Board approval to ask the lender to cut the offered interest rates,” replied Aurangzeb. He noted that the offer came from a non-Gulf and non-Chinese commercial bank, but did not reveal its identity.

A finance ministry official stated that Standard Chartered Bank had provided a loan of less than $400 million, but it demanded a double-digit interest rate that the government could not afford. Aurangzeb stated that the government will wait for IMF Board permission before asking the commercial bank to lower its offered interest rates.

The finance minister stated that two significant developments had occurred in the recent few days, demonstrating that Pakistan was well on its road to macroeconomic stability. He described Fitch rating agency’s move to raise Pakistan’s credit rating by one notch and the central bank’s decision to decrease interest rates by 1% as “very critical elements for achieving macroeconomic stability”.

When questioned why Standard and Poor’s had not upgraded Pakistan’s CCC+ rating, the minister responded that moving from a CCC+ to a B minus rating would have been a significant improvement.

He believed that the three rating agencies will upgrade Pakistan’s ranking to B negative by the end of this year, allowing it to enter foreign capital markets to issue sovereign notes at lower rates than given at the existing CCC+ ratings.

Pakistani bonds have been rated below investment grade by three major credit rating agencies due to the country’s dismal economic position and significant external financing requirements. Fitch increased the rating by one notch last week, from CCC to CCC+, but it remained below investment grade.

The finance minister stated that the government was attempting to issue the Panda bond in Chinese markets and has hired a Chinese financial consultant business to complete the deal by the end of current calendar year or early 2025.

The minister stated that the government was considering employing another Chinese financial counsel to secure the energy debt rollover. He stated that Pakistan had asked a five-year extension on its energy debt, but that any deal would take time to negotiate.


He estimated that even converting Chinese power facilities from imported to local coal would take two to three years.

Domestic Agenda

The finance minister stated that in order to reduce spending, the government had implemented a privatisation program, and that efforts were underway to eliminate or consolidate departments in accordance with the 18th Constitutional Amendment. “It is about time to right-size the federal government,” the politician said.