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To repay Eurobond debt, Pakistan likely to borrow $750m from China

Discussion in 'South Asia & SAARC' started by Agent_47, Apr 8, 2017.

  1. Agent_47

    Agent_47 Admin - Blog Staff Member MODERATOR

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    Pakistan may borrow another $750 million as a short-term foreign commercial loan from China, ironically to pay back the Eurobond debt incurred during the rule of Gen (retd) Pervez Musharraf, also underscoring that the country is no more able to retire its debt from own resources.


    Due to the relatively low cost of borrowing from foreign commercial banks, the government is considering taking another commercial loan to return $750 million Eurobond debt, said sources in the Ministry of Finance.

    In 2007, the Musharraf government had issued 10-year bonds at a 6.875% interest rate, maturing on May 24 this year.

    Earlier, the Finance Ministry had a plan to issue another sovereign bond equivalent to $750 million to return the previous debt. The country’s Foreign Economic Assistance Plan for fiscal year 2016-17 included a $1 billion sovereign bond and a $750-million Sukuk bond. In September last year, the government raised $1 billion by floating Sukuk bond at 5.5% interest rate. It has not yet called the bids for hiring financial advisors to float another international bond.

    The possibility is that the government will get this loan from China, which could be the third major borrowing from Beijing in the past six months, said sources. Earlier, Chinese banks gave $1.3 billion to support the balance of payments situation and providing a cushion to foreign currency reserves.

    Compared with borrowing through international bonds, taking loans from the commercial banks is hassle free, sources said. The government also opted for short-term foreign commercial bank loans to avoid scrutiny that it had to face after its second last launch of $500 million Eurobond in September 2015.

    The Finance Ministry quietly borrows from foreign commercial banks without inviting competitive bids, which makes the job easier for officials at Q-Block.

    The sources said that China was offering these loans at around 3.3% interest rate, which is far better than even the best rate of 5.5% that Pakistan got against $1 billion Sukuk bond issued last year. Its previous foreign commercial borrowings were at around 4.7% interest rate.

    [​IMG]


    However, it’s a tradeoff between cost and rollover risk. Compared with five- to ten-year tenures of the bonds, these short-term loans are taken for one year to one-and-a-half-year period, which increases risks attached with exchange rate fluctuation.

    Pakistan’s borrowing history

    Borrowing from foreign commercial banks is a new phenomenon for Pakistan in the 21st century, as both the military dictator-led government and PPP did not use this window, which is considered expensive compared with the loans that Pakistan has been historically taking from multilateral and bilateral sources.

    After assuming power, the PML-N government has borrowed over $3.3 billion from foreign commercial banks. In addition to this, it borrowed $4.5 billion by issuing dollar-denominated Euro and Sukuk bonds in the past three years.

    Pakistan has started borrowings to retire past borrowings, suggesting its inability to pay back the loans from its own resources. Independent economists see it as a sign of debt trap, which has now increased the cost of debt servicing.

    Until late last year, the federal government was boasting about the “highest ever” official foreign currency reserves maintained by State Bank of Pakistan (SBP). As the International Monetary Fund programme ended, the reserves, largely maintained through expensive foreign borrowings, also started sliding.

    After reaching a peak of $19.5 billion, the SBP’s official foreign currency reserves have now slipped to $16.4 billion again – a result of reduction in exports and remittances receipts and increase in foreign debt repayments.

    The cost of foreign commercial borrowings is also low because the government has been waiving of all types of taxes on these borrowings. Just last month, the federal cabinet waived off 15% income tax on profit that foreign commercial banks were earning on $2.7 billion loans that these financial institutions extended to Pakistan.

    The move to waive off interest rate was aimed at making a claim that the government obtained these loans at below 5% interest rate in dollar terms. By including the 15% interest cost, the interest rate could have been above 5%.

    The cabinet also gave ex-post facto approval of these loans that the Finance Ministry had borrowed without its prior approval and also by bypassing the competitive process.

    China’s loans to Pakistan are growing at a rapid pace than its investment under the China-Pakistan Economic Corridor. In total, Pakistan obtained $2.1 billion loans from China from September to February 2016-17. Out of that, $1.3 billion were on commercial terms while another $1 billion were for project financing.

    https://tribune.com.pk/story/1377579/repay-eurobond-debt-pakistan-likely-borrow-750m-china/

    @kaku @Vyom @PARIKRAMA @Levina @Abingdonboy
     
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  2. SrNair

    SrNair Lieutenant FULL MEMBER

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    If things goes like this ,tomorrow they will offer the nation in a platter to China.
     
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  3. Butter Chicken

    Butter Chicken 2nd Lieutant FULL MEMBER

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    Acc. to pakistani news,Pakistan will repay 90 billion USD to China for 55 billion of construction.That is a humongous amount of profit,no wonder China is interested
     
  4. layman

    layman Aurignacian STAR MEMBER

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    Chinese the puppet masters of Pak have a larger and bigger game plan for Pakistan in broad spectrum. CPEC is going to be a economic wall which will shield Pak from India as Chinese would defend it ultimately with all means. Pakistan knows it and accepts it.
    I have seen people killing themselves out of paranoia but never seen a nation killing itself for the same.
     
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  5. vstol jockey

    vstol jockey Colonel MILITARY STRATEGIST

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    No, Pakistan will not be able to pay anything. China will just take whole of POK, Gilgit & Baltistan in lieu of the loan given.
     
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  6. layman

    layman Aurignacian STAR MEMBER

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    If Pak economic is growing far lesser then the amount of interest it is paying for the loans and Bonds from the investment which returns very low then it is no way going to repay it.

    Chinese knows it very well, it is not a investment for today.
    For Chinese it is a investment which will earn itself in next 10 years,
    Once the major export shipments is diverted through land via CPEC they will be cutting the amount of time it requires to ship the goods there by shipping lot more perishable goods,
    Currently the exports are at 3 to 4 trillion, even if 1 trillion exports moves through CPEC then the money it has invested has been paid off in full in 1 year.

    Pakistan know it very well too...
    The loan they are taking they are not going to repay it. It will be written off or subsidized in other forms.

    They know they will lose their industrial production completely,
    But hey they cant compete with Chinese Dumping even if they are able to produce (lol) so that is a lost case.

    Pak need a guarantee that India will not strike back for they are not able to control some of its terror elements, and they cant rely on any nation, Even Chinese they can rely only if Chinese are going to lose something from it.

    Stakes of the game has been raised.
    If Chinese are to back off this quagmire India has to raise the stakes.
     
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  7. Ankit Kumar 001

    Ankit Kumar 001 Captain Technical Analyst

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    Pakistan is seeking $700 million for balance of payments’ support in the next two months from the Asian Development Bank (ADB) and France, loans that are aimed at offsetting pressure from the external account that has come under strain due to a growing trade deficit.

    The finance ministry is in negotiations with the Manila-based lending agency to seek two policy loans, each of $300 million, in the name of Public Sector Enterprises (PSEs) Reforms-tranche-II and Sustainable Energy Sector Reforms-tranche III, said sources. A $100-million loan by the French Development Agency (AFD) France is also pegged with the $300-million ADB energy sector loan, they added.

    Unlike project lending that is disbursed as work on the scheme progresses, policy loans are paid upfront in one tranche that helps the government build foreign currency reserves and diversify budget financing.

    The government is trying hard to receive both these loans before June-end aimed at supporting foreign exchange reserves that have been on the decline since expiry of the International Monetary Fund (IMF) programme in September last year.

    The $300-million PSEs reforms had originally been planned for the next fiscal year 2017-18. On the request of the finance ministry, the ADB has advanced the calendar and the loan is expected to be approved late next month, the sources said.

    An ADB mission recently completed a visit to Pakistan and termed the progress on PSEs reforms loan satisfactory, said the finance ministry sources.


    Meanwhile, the ADB on Monday formally announced Xiaohong Yang as the new Country Director for Pakistan, who assumed office on the same day. She is ADB’s first woman Country Director in Pakistan as well as the first national of the People’s Republic of China (PRC).

    Yang will bring to this key position strategic leadership and considerable experience in the region to support Pakistan’s transformation, said Sean O’Sullivan, Director General for Central and West Asia at ADB.

    Yang will spearhead ADB operations in Pakistan to support the country’s development goals through regional initiatives such as China-Pakistan Economic Corridor (CPEC) and Central Asia Regional Economic Cooperation (CAREC), according to a handout issued by the local office of the ADB.

    The sources said that the government was also making efforts to get a $300-million energy sector loan by June, but due to poor performance of the sector the government is facing difficulties in meeting prior actions.

    Pakistan’s external account has come under pressure after the government could not attract non-debt creating foreign inflows. The current account deficit for the first nine months of fiscal year 2016-17 rose to $6.13 billion, which was 2.6 times higher than the deficit recorded a year ago. The main reason for the widening current account deficit was the trade deficit that ballooned to $23.3 billion in just nine months.

    The government has already borrowed $1.3 billion from China for balance of payments’ support while another amount of $750 million will be obtained within a month to repay the Eurobond floated in 2007.

    It seems that the ADB has not attached the $300 million PSEs loan with privatisation of power distribution companies. The sources said that the ADB’s conditions are largely focused on bringing administrative and financial improvement in the PSEs.

    The federal government owns 191 PSEs, comprising 176 companies, eight financial institutions and seven federal authorities. The assets of the PSEs were estimated at Rs9.4 trillion in 2014 and total employees were 420,000, of which Pakistan Railways employed 78,000, according to the ADB documents.

    Close to 150 PSEs are reporting losses. Reported financial information needs to be treated with caution, however, as many entities do not have appropriate accounting policies and audit and internal control procedures in place, according to the ADB.

    Improvement in corporate governance, reporting standards and bringing transparency in these PSEs are the target areas of the $300 million PSEs loan. Pakistan Railways will have to improve its reporting standards by adopting IFRS during the next fiscal year.

    Pakistan International Airlines, Pakistan Steel Mills, power distribution companies, and Pakistan Railways are major recipients of government cash assistance due to huge losses that they are incurring.

    The ADB said that in fiscal year 2015-16, fiscal allocation to support PSE day-to-day operations constituted 65% of overall budget allocations to the PSEs, severely limiting critical capital development expenditures to improve PSE efficiency.

    https://tribune.com.pk/story/1392572/borrowing-spree-continue-pakistan-now-seeks-700m/
     
  8. Hellfire

    Hellfire Mod Staff Member MODERATOR

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    That is nice. Deficit financing :)
     
  9. Ankit Kumar 001

    Ankit Kumar 001 Captain Technical Analyst

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    Wait for CPEC

    After CPEC Pakistan will be giving aid to World Bank , ADB and IMF.

    Dollars will flow from drains !!!
     
  10. proud_indian

    proud_indian FULL MEMBER

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    and their kids will wipe their noses with dollars
     
  11. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    They have already offered. karachi stock exchange is sold to china. To fill their pockets, goon Punjabi generals are selling Pakistan to china. Infact US should intervene and buy Pakistan so a rogue country may not become a colony of another rogue nation.
     
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  12. lca-fan

    lca-fan Captain FULL MEMBER

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    Cross posting from same thread.

    Pakistan 2017 Comprehensively Colonized By China – Analysis


    [​IMG]

    Reminiscent of British colonisation of India two centuries ago facilitated by some Indian princes connivance two centuries ago, China in 2017 has comprehensively colonised Pakistan with the connivance of Pakistan Army and Pakistani politicians.

    India needs to take a special note of this trend as in 2017 wherein it is emerging that Pakistan’s own national interest would now slide into a sub-text and be subsumed into the all-enveloping Chinese strategic blueprint for South Asia. Pakistan would only be a Chinese colonial proxy for dealing with India.

    Perceptionaly, in 21st Century political parlance it can be believed that a nation gets “colonised” when willingly a nation’s power structure elites concede their policy decision-making wholly or virtually to a powerful neighbour in the domains of foreign policy, political dynamics, economic development and subsuming one’s own national security interests to those of their ‘strategic patron.’

    Strategically ironic is the fact that Pakistan, as a nuclear-armed Islamic Republic of Pakistan, self-proclaimed as geopolitically significant globally, and also proclaiming ‘strategic equivalence’ with India as the neighbourly Emerged Power, should have succumbed to China’s geopolitical pressures over the decades to build it as the contending power with India. In the process decades later in 2017, Pakistan despite its mighty claims has seemingly emerged as comprehensively colonised by China.

    Ironically further, is the tragic reality that China’s colonisation of Pakistan was made possible by the majority Punjabi-dominated Pakistan Army Generals and the Punjabi-dominated Pakistani political set-up. ‘Mountains-High’ and ‘Oceans-Deep’ rhetorical flourishes on the ‘China & Pakistan Iron Brothers’ relationship is nothing but a fig-leaf to deceive the unsuspecting people of Pakistan on the true nature of this relationship. Pakistan in 2017 seems to have emerged as yet another Muslim Province of China like Xinjiang.

    China’s comprehensive colonisation of Pakistan needs to be examined in as to how far China is in control of Pakistan’s processes of foreign policy, dominance of Pakistan’s economic future and most significantly as to how much China has penetrated the Pakistan Army hierarchy and how deeply the Pakistan Army has been rendered an irreversible military client state of China.

    Much propagated in academic and strategic circles is that it is the Pakistan Army which controls Pakistan’s foreign policy towards India and Afghanistan and even major powers like Russia and USA. The truism in 2017 is that the foreign policy of Pakistan towards these countries is being controlled by China, through its proxy, the Pakistan Army. This is said in the sense that Pakistan is made to factor-in China’s strategic sensitivities when Pakistan formulations on India and Afghanistan are made and its attitudinal inclinations towards the Major Powers are determined.

    The China-Pakistan Axis is fully in play in 2017 with connivance of Pakistani military and Pakistan political hierarchy and significantly emerges as a crucial determinant in Pakistan’s dealings with USA, India and Afghanistan overturning existing templates. In the same pattern falls the Russian o pivot to Pakistan under China’s influence.

    China’s control of Pakistan’s political processes and thought is achieved by its penetrations of the Punjabi-predominant Pakistan Army hierarchy and politicians. Has anyone observed China reaching out politically to Pakistani politicians of other fringe provinces of Pakistan? Why do Pakistani politicians sing hymns of praise for China, had it not been for political gains?

    Why does China shield global terrorists like Massod Azhar from being sanctioned by United Nations by China using its veto? Is it not that China has a vested interest n Pakistani Jihadi affiliates of Pakistan Army targeting India? Is it not that by such negativity, China achieves its aims of destabilising India through its colonial proxy, the Pakistan Army?

    Pakistani political establishment’s brutal suppression of unrest in Gilgit and Baltistan in the North and even more brutally in Balochistan in the South on the Arabian Sea Coast has more to do with furthering China’s strategic interest in these regions.

    China in 2017 has firmly colonised Pakistan in all economic domains extending from power generation, infrastructure development and like the British in India’s colonisation reduced Pakistan to the status of a resources provisioning economy for the Chinese economy.

    China’s masterstroke in inducing Pakistan into mortgaging Pakistan’s present and future economic prosperity has been achieved by Chinese President Xi Jinping’s announcement in 2015 of the much flaunted $ 46 billion China Pakistan Economic Corridor (C PEC). Projected by China as a Chinese master blueprint for economic transformation of Pakistan, it is a merely a strategic Chinese blueprint for China’s colonial control of Pakistan in perpetuity, strategically and economically. Pakistan is being made to take heavy loans from Chinese banks at high rates of interest to finance the CPEC and some experts opine that Pakistan would take nearly forty years to pay back Chinese loans.

    Notable voices within Pakistan have publicly raised questioning the CPECs economic benefits to Pakistan and pointing out that the virtual and real economic benefits accrue to China. Further, whatever economic benefits that fall within the Pakistani lap are all in favour of Punjabi-dominated Pakistan Amy and the Punjab Province. The CPEC has therefore created political divisions within Pakistan on the classic colonial pattern of ‘divide and rule’. The CPEC alignment predominantly runs through the heartland of Pakistan Punjab.

    The Pakistan Army never sold its ‘soul’ to the United States despite decades of United States providing ‘strategic patronship’ to Pakistan and pumping in billions of dollars of aid additionally. In fact, the Pakistan Army in marked ingratitude, all along, double-timed the United States. Contrastingly, the Pakistan Army has noticeably sold its soul to China, even when China has not matched American munificence. More significantly, the Pakistan Army has never dared to double-time China on its strategic interests. The Pakistan Army is fully subservient to Chinese dictates as exemplified by the Pakistan Army assault n Lal Masjid on Chinese dictates, sometime back

    If CPEC through which China engirdles Pakistan, or better still, through CPEC the Chinese shackling of Pakistan in perpetuity is achieved by China, then it is the Pakistan Army which is in marked collusion with China to achieve this. The Pakistan Army through two different Army Chiefs has committed itself to be sole provider of security to CPEC through a specially raised Army Division sized force. Not only that, the Pakistan Army has been at odds with the civilian government in that the Pakistan Army wants full control of project-management of the CPEC project by edging out Pakistani civilian agencies. The intentions of the Pakistan Army in furthering China’s strategic interests are suspect?

    The Pakistan Army nuclear weapons arsenal and its ballistic missiles arsenal came into existence fully on Chinese technology and assistance and so are its military hardware inventories in 2017. Should in the future Pakistan ever wishes to exit from the Chinese colonial hold, the Pakistan Army would take decades to transform its predominantly Chinese military hardware inventories.

    More noticeably, whenever Pakistan is faced with some crisis or a crisis in the making the Pakistan Army Chief of the day rushes to Beijing for consolations, or better still, Chinese mentoring, especially when related to India.

    Concluding, it is tragic to observe that the Punjabi-dominated Pakistan Army and the Punjabi-dominated Pakistani political establishment blinded by their pathological hatred for India should have willy-nilly become the handmaidens for China’s comprehensive colonisation of Pakistan. India would be well advised to factor-in this perspective in dealing with Pakistan. India would henceforth not be dealing with Pakistan but with a China-colonised Pakistan where Pakistani national interest would be now a sub-text of China’s strategic stakes in South Asia.

    http://www.onenewspage.com/n/World/...mprehensively-Colonized-By-China-Analysis.htm
     
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  13. vstol jockey

    vstol jockey Colonel MILITARY STRATEGIST

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    Given this third rate state of Pakistan, What will these guys in Kashmir get by asking Azaadi? Will they be able to govern or defend themselves?
     
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  14. lca-fan

    lca-fan Captain FULL MEMBER

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    Problem is inter breeding has caused so much brain damage that they can't even make out what is good or bad for them.:lol::lol:
     
  15. Veeran

    Veeran 2nd Lieutant FULL MEMBER

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    Which I think was the plan from the beginning since it gives them legal backdoor entry for control of POK.
     

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