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Pakistan pays off Euro Bond by new 1 billion USD loan from China

Discussion in 'South Asia & SAARC' started by Ankit Kumar 001, Jun 4, 2017.

  1. Ankit Kumar 001

    Ankit Kumar 001 Major REGISTERED

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    ISLAMABAD: Pakistan on Thursday paid back $750 million Eurobond debt but only after receiving $1 billion loan from China, as the country struggles to sustain the official foreign currency reserves at their current levels amid mounting foreign payments requirements.

    Pakistan retired the Eurobond debt of $750 million, said an official of State Bank of Pakistan. However, despite the retirement of debt, Pakistan’s external debt would not reduce, as the country borrowed another $1 billion from China Development Bank to pay back the old debt.

    With fresh $1 billion borrowing, Chinese banks have given $2 billion loan to Pakistan during past nine months alone. These loans have been obtained on an interest rate ranging from 4.22 per cent to 4.44 per cent, according to Finance Ministry documents. However, the government waived off all taxes on these loans to show a reasonable cost of borrowing.

    In 2007, the Musharraf government had issued 10-year bonds at a 6.875 per cent interest rate. Although, the government contracted the Chinese loans at around 4.4 per cent interest rate, it would increase refinancing risks due to relatively shorter maturity period.

    In its second last meeting, the federal cabinet had approved signing the foreign commercial facility agreement of $1 billion with the China Development Bank, according to official documents.

    The central bank on Thursday also revealed the official foreign currency reserves position till May 26. It said that the total liquid foreign reserves held by the country stood at US$21.77 billion. Foreign reserves held by the State Bank of Pakistan increased to $16.921 billion on back of $1 billion Chinese loan. The net foreign reserves held by commercial banks stood at $4.848 billion.

    During the week ending May 26, SBP’s reserves increased by US$709 million to US$16.922 billion, due to official inflows, according to an official handout issued by the SBP. The $16.9 billion reserves include $1 billion Chinese loan. In its next weekly statement, the central bank would reflect the impact of $750 million repayment.

    From July through March of the current fiscal year, Pakistan’s external debt servicing – including interest payments – consumed $3.9 billion, according to the Economic Survey of Pakistan. The nine-month debt servicing ate up 24.2 per cent of our export receipts – the highest figure during the past 14 years, suggesting worsening of the external debt indicators.

    FRDL Amendment

    The Senate Standing Committee on Finance recommended amending the public debt definition –backed by the PML-N’s Senator Ayesha Raza Farooq. The amendment says that the public debt should be reported net of the government’s deposits placed in banking system.

    If parliament approves the amendment, it will further camouflage the real debt situation after last year’s amendments introduced in Fiscal Responsibility and Debt Limitation Act of 2005.

    Due to growing public criticism, Finance Minister Ishaq Dar has started emphasising upon the net public debt – the public debt minus deposits of the government. Senator Ayesha has proposed that this should be given legal cover by amending the debt definition.

    “The debt to GDP ratio is now correctly being shown in net terms rather than gross terms”, said Senator Ayesha during the committee meeting.

    The Ministry of Finance’s Director General Debt Office supported Senator Ayesha’s proposal, although Ministry of Law official said that this amendment can only be made with the prior approval of federal cabinet.

    If the Parliament approves the proposed amendment, the net public debt would come down by Rs2 trillion. As of March 2017, the country’s public debt was Rs20.872 trillion or 65.5 per cent of GDP, according to Finance Ministry. As per Ishaq Dar innovation and backed by Senator Ayesha, the net public debt would come down to Rs18.892 trillion or 59.3 per cent of the GDP.

    https://tribune.com.pk/story/1425198/eurobond-debt-paid-off-chinese-loan/
     
  2. Ankit Kumar 001

    Ankit Kumar 001 Major REGISTERED

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  3. Abingdonboy

    Abingdonboy Major IDF NewBie

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    Love it, literally the epitome of a debt trap.

    China is banking on some of the poorest and least solvant nations on the planet and propping them up with massive loan packages, this could (most likely will) blow up massively in their face at some point down the road.....
     
  4. Ankit Kumar 001

    Ankit Kumar 001 Major REGISTERED

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    However Pakistan tries to camouflage it's debt ,at the end of the day, it has to pay back its amount with interest.

    And if China continues to provide loans so as to wipe out others influence , some 5-10 years down the line, Pakistan will be a slave state of China. Much more than the East India Company thing.
     
  5. Indian Jatt

    Indian Jatt Lieutenant FULL MEMBER

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    Maybe they will demand more land and then finally a vassal state like Japanese and US relations, they will keep their aircraft carrier in pakistan and keep an eye on India and Middle East countries at all the time, maybe its time India takes good control of the Malacca....
     
    Last edited by a moderator: Jun 4, 2017
  6. Butter Chicken

    Butter Chicken Captain FULL MEMBER

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    Autonomous Province of Pakxiang
     
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  7. Hellfire

    Hellfire Devil's Advocate THINKER

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    If you mean Chinese then the answer is No.

    Chinese are being Chinese here. They are playing for leverage over poorly developed nations of Africa and other places. These places are resources rich as the incumbent industry has not been able to exploit their expertise due to various reasons, instability being one of them, to tap their own potential.

    Same is with Sri Lanka. Cheap labour and high accessibility to Timber is one prominent reason.

    Chinese have always manoeuvred for 'influence'/'advantage' and they are doing so now also. Nowhere are they over stretching themselves.
     
  8. bharathp

    bharathp Developers Guild IDF NewBie

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    great. while they are at it - they can simply blame "non state actors" for the debt.

    they have practiced this before on NK. its neither new nor unique. China literally has two rabid countries on its leash that it can threaten to let lose if it goes down. and in a witty way. they made sure the rabid countries always believe its the rest of the world (not including China) thats at fault for their follies.
     
  9. Hellfire

    Hellfire Devil's Advocate THINKER

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    1. What do you mean by that?

    2. How is the present 'control' bad?
     
  10. bharathp

    bharathp Developers Guild IDF NewBie

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    This is so true. the Chinese are now VERY safe and VERY sound economically. they can take a bunch of these loser countries on their own. but they will use the "loser" countries to their own advantage - either strategic or economic. The Chinese never do something without a great deal of advantage to their own.
     
  11. bharathp

    bharathp Developers Guild IDF NewBie

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    that lady has an MBA and is also on the parliament committee for the CPEC project. just fyi.
     
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  12. nair

    nair Guest

    Debt trap at its best.... The funny part is Pakistanis are happy about the current help of Chinese.. ...
     
  13. Butter Chicken

    Butter Chicken Captain FULL MEMBER

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    In another Indian forum question about debt trap was asked to a pakistani..he replied "Kal kisne dekha hai" ! :blink::fighting2:
     
  14. SrNair

    SrNair Captain FULL MEMBER

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    I dont think so .Chinese are brilliant business men.A few years ago their strategy was investing all those trillion $ reserve in their own nation with an intent to earn great returns .
    But only outcome was around 7 trillion bad debt and ghost cities .
    They can only sustain if they invest all those in some other developing nation .Pakistan is the one of the best.For each of those loans they will import thousands of workers and tonnes of cheap consumer products in to Pak market .
    Chinese perhaps also infiltrated in all those sensitive military economic details in Pakistan.
    And still investment in Pakistan is manageble to China .After all up to 200 billion$ is not a big deal to China .
    Only thing I can see here is the enslavement of Pakistanis .
     
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  15. Bloom 17

    Bloom 17 2nd Lieutant IDF NewBie

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    But the problem is more the Chinese enslave Pakistan the more they prop up Pakistani army with their defense equipment. firstly to use it against India, secondly to help their faug be in power. End of the day they are going to be a bigger Headache if they are in a debt trap
     
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