Challenges and shifts in Pakistan’s economic landscape:
From loan agreements to currency depreciation
By Syed Ali Hassan
Iran Daily’s correspondent in Pakistan
The government of Pakistan has mortgaged the Islamabad International Airport for the Chinese loan. The government has signed an agreement approving the issuance of a sovereign guarantee worth $3 billion on Chinese debt. The outgoing Cabinet’s Economic Coordination Committee (ECC) made this decision en route to transferring the call to the caretaker government for a decision on importing 1 million metric tons of wheat.
After the ECC meeting, the Ministry of Finance conveyed that the Pakistan Atomic Energy Commission had submitted a summary regarding government guarantees for Chashma Nuclear Power Project Unit 5.
The ECC sought approval for a sovereign guarantee for the Chashma 5 project under the IMF program. According to the terms of the agreement, China will levy an interest rate of 3% on a 21b RMB loan for a period of 20 years, with repayments commencing after eight years, and China requiring sovereign guarantees with high interest rates.
According to the financial agreement, the sovereign guarantee issued by the government of Pakistan was the basic condition for the ratification of the agreement by China.
China National Nuclear Corporation Overseas Limited has offered a supplier credit of 21.3b for a 1,200 MW nuclear power plant construction.
According to the Ministry of Finance, the ECC has also approved a summary of the State Support Agreement for the outsourcing of Islamabad International Airport through international competitive bidding. The most negative impact of this approval will be on the employees of the Civil Aviation Authority and Pakistan International Airlines that has already faced severe losses. Pakistan’s Democratic Movement (PDM) is selling national assets, including precious metal reserves, to Saudi Arabia, the UAE, and some Western investors.
Conversely, following the arrest of Imran Khan, Pakistan Tehreek-e-Insaf’s chairman and former Prime Minister, the Pakistan Stock Exchange is experiencing a sharp downturn due to economic uncertainty. The bearish trend led to an 81% decrease in share prices on Wednesday. The SE 100 index fell to 47954 points.
Adding to economic concerns, the value of the dollar is continuously increasing due to a shortage of dollars in the country. The dollar’s appreciation raised Pakistan’s external debt by 7%, with the dollar reaching Rs 288 in the interbank market on Tuesday and Rs 296 in the open market on Wednesday, up from Rs 303.