Pakistan is once again facing a serious economic crisis. This time the blow has come from the United Arab Emirates (UAE), which has refused to rollover the $3 billion loan given to Pakistan and demanded the amount back. This is the first time in the last seven years that the UAE has refused a loan extension, further increasing the pressure on Pakistan’s economic condition. Meanwhile, Pakistan is exploring options to take new loans to repay its debt.
According to Pakistan Finance Minister Muhammad Aurangzeb, as of March 27, the country had foreign exchange reserves of about $16.4 billion, which is considered sufficient for about three months of imports. However, there is a possibility of a huge decline in it after repayment of UAE’s debt.
Rising tensions in the Middle East and rising crude oil prices have further complicated Pakistan’s economic challenges. In such a situation, the government faces a big challenge to maintain the reserves at a safe level.
The Finance Minister has indicated that the government is considering various options, including seeking assistance from other countries and taking loans from commercial banks. However, he did not give any clear answer regarding possible help from China and Saudi Arabia, but according to sources, talks are going on with these countries.
Also, to deal with the economic pressure, Pakistan is now turning to the international bond market. The government is planning to issue Eurobonds again after four years. Along with this, Islamic Sukuk and dollar-based rupee bonds will also be issued.
Notably, Pakistan is preparing to issue ‘Panda Bond’ in Yuan currency for the first time. There are plans to issue Panda bonds worth $250 million in the second quarter, which can be further expanded to $1 billion. The Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB) are supporting this process.
Pakistan is currently waiting for the next installment of the $7 billion bailout package from the International Monetary Fund (IMF). It is expected that an amount of about $ 1.3 billion can be approved in the upcoming meeting of the IMF Board. The Finance Minister said that due to the oil crisis, no demand has been made for additional funds from the IMF, but if the country’s macroeconomic situation worsens, Pakistan may have to approach the IMF again.
At present, the biggest challenge before Pakistan is to repay the debt of UAE and to save the foreign exchange reserves from falling. Economic experts believe that if concrete steps are not taken in time, Pakistan’s financial situation may worsen.
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