Pakan requests China to rollover $6.3 billion debt

Pakan has requested China to rollover its $6.3 billion debt that is maturing in the next eight months as part of its overall plan to arrange $34 billion in the current fiscal year to meet its debt and external trade-related obligations, according to a media report on Sunday.
Another proposal was also under consideration to seek a fresh Chinese loan to repay the maturing bilateral debt during the fiscal year 2022-23, ending on June 30, the Express Tribune newspaper reported.
The issue of rollover and refinancing of nearly $6.3 billion commercial loans and the central bank debt was discussed in a meeting between Chinese Ambassador to Pakan Nong Rong and Finance Miner Mohammad Ishaq Dar on Saturday, the paper said.
The $3.3 billion Chinese commercial loans and $3 billion worth of Safe deposits loans were maturing from now till June next year, according to the Minry of Finance officials.

The Safe deposit is on the balance sheet of the central bank. In addition to this, over $900 million in bilateral Chinese debt was becoming due during the current fiscal year.
For the current fiscal year, the International Monetary Fund and the Minry of Finance have estimated Pakan’s gross external financing requirements in the range of $32 billion to USD 34 billion, excluding the impact of the recent devastating floods.
Pakan has already obtained $2.2 billion in loans during the July-September quarter while Saudi Arabia has announced to rollover $3 billion debt maturing in December this year.
The country still needs to arrange $29 billion and it is looking for a minimum of $6.3 billion to $7.2 billion rollover from China in addition to any fresh lending.
Citing sources, the paper said that this time the government was seeking rollover of the $3 billion Safe deposit for more than one year, preferably for three to five years.

China has extended a total of $4 billion in Safe deposits and out of this $1 billion has already been rolled over in July this year.
Prime Miner Shehbaz Sharif is visiting Beijing on November 1 with a long l of new projects and requests to rollover the exing debt, considering sanctioning new debt and preferential trade treatment for certain exportable goods.
The cash-strapped country is under pressure from western institutions and the governments to seek rollover of Chinese debt, currently standing at $26.7 billion including public and publicly guaranteed debt.
Chinese commercial loans cannot be rolled over but can be refinanced, which requires the government to first pay the maturing debt and then get it back. This consumes significant time, which in turn puts pressure on the foreign exchange reserves until the transaction is not reversed.
China had taken three months’ time in refinancing a $2.3 billion commercial loan that Pakan paid back in March. Pakan’s gross foreign exchange reserves currently stand at $7.5 billion.
“The finance miner also appreciated the support extended the Chinese leadership for flood relief and refinancing of syndicate facilities of RMB 15 billion ($2.24 billion) to Pakan,” according to a statement issued the Minry of Finance after the meeting.
The statement suggests that both sides discussed the issue of commercial loan refinancing.
Fitch — the international credit rating agency — on Friday highlighted the contradictory debt rollover statements given Pakani policymakers.
“The previous finance miner said before resigning that Pakan would seek debt relief from non-commercial creditors. Prime Miner Shehbaz Sharif also appealed for debt relief within the Paris Club framework. More recently, however, the Miner of Finance (Ishaq Dar) publicly ruled this out,” Fitch stated.
Fitch downgraded Pakan to the highly risky debt category.
Dar took the right decision to withdraw the motion of seeking Paris Club debt restructuring. The Paris Club debt rescheduling decision was unnerving the global markets.
The finance miner further highlighted the economic challenges and policies of the present government with the aim to bring about economic and fiscal stability, his minry stated.
Sources said that both sides also discussed the issue of outstanding Chinese dues on account of payments to the Chinese Independent Power Producers for the cost of the electricity purchase.
Pakan is expected to solve the lingering issue of opening a bank account to save Chinese companies from the vicious cycle of circular debt before the prime miner’s visit.
The proposed visit of Sharif to China was also discussed in the meeting and both sides hoped that it would enhance bilateral relations between both countries, the finance minry said.
Dar assured his full support for the successful implementation of the China-Pakan Economic Corridor (CPEC) projects, according to the statement.
Rong reaffirmed the Chinese government’s continued support to Pakan and thanked Islamabad for facilitating Chinese companies in various projects in the country, it added.
Rong also assured full support and cooperation of the Chinese government in developing Special Economic Zones as part of CPEC.
The issue of changing the design and scope of a much-delayed 300 megawatts Gwadar imported coal-fired power plant also came under discussion.
Pakan wants to shelve the plan due to the high cost of imported fuel and its preference for local resources.
The China Communications Construction Group (CCCG) had planned to set up the plant at a cost of USD 542 million. But diplomatic sources said the Chinese government was not keen to either change the fuel to LNG or use Thar coal due to its high cost.
Pakan cannot make any unilateral change in the project and will have to place its decision before the JCC for endorsement, which makes strategic planning for CPEC.
The JCC meeting is scheduled to be held on October 27, according to the paper.
The International Monetary Fund (IMF) on August 29 approved the release of a $1.17 billion tranche to the cash-strapped country, providing much-needed budgetary support to meet fiscal and external deficits.
Despite the disbursal of the IMF tranche, the economic situation remains precarious.
The devastating floods, which have left more than 1,700 dead and displaced more than 30 million persons, added to Pakan’s forex woes, with an estimated loss of over $30 billion to the economy.