ISLAMABAD: Pakistan will repay next week a $500 million loan it obtained from China as a safe deposit to support its dwindling foreign exchange reserves in 2009.
After many rollovers, the loan is maturing for repayment on January 23.
Finance Minister Ishaq Dar on Tuesday directed the State Bank of Pakistan (SBP) to repay the loan to the Chinese State Administration of Foreign Exchange (SAFE) upon its maturity on January 23.
The loan in the form of a deposit was taken in January 2009 due to the weak current account situation at that time and placed with the SBP. Since then the deposit was rolled over annually.
An official statement quoted the minister as saying that it has been decided to repay the loan on the due date instead of yet another rollover given strong macroeconomic indicators and a stable foreign exchange reserves position of well over $23 billion.
The minister said he has already obtained approval of the prime minister for the repayment of the Chinese loan.
The statement said Prime Minister Nawaz Sharif has formally expressed his deep appreciation to the prime minister and the government of China for their critical support for stabilising the current account since 2009.
The minister also presided over a meeting on Tuesday to review the five-year – 2017-18 to 2021-22 – macroeconomic framework and directed to align medium-term fiscal policy with the targets provided in the amended Fiscal Responsibility and Debt Limitations (FRDL) Act.
Mr Dar said the government will continue on the path of the economic reforms programme that was articulated at the beginning of 2013-14.
He said the government is focused on improving key macroeconomic indicators, including the investment-to-GDP and tax-to-GDP ratios. Highlighting the importance of recent amendment to the FRDL Act, the minister said it is for the first time that the law provides for limiting the deficit of the federal government.
He said the new law requires the federal government to bring down its deficit in three years starting with 2017-18 at 4pc of GDP and thereafter maintaining it at a maximum of 3.5pc of GDP.
Additionally, he said the law also requires that the debt-to-GDP ratio is brought down from the current statutory limit of 60pc, to be achieved by the next year, to 50pc in 15 years.