By Islamuddin Sajid
ISLAMABAD (AA) - Pakistan Prime Minister Shehbaz Sharif on Friday confirmed that Islamabad has sought debt reprofiling from China as the South Asian nation has reached a staff-level agreement with the International Monetary Fund (IMF) for a bailout package.
Speaking at a cabinet meeting, Sharif informed his ministers that he had written a letter to Chinese President Xi Jinping. "I have written a letter to the President of China for debt reprofiling," Sharif said during an appearance on state-run Pakistan Television.
In addition, Pakistan has exempted Chinese citizens from visa fees effective from Aug. 14. Recently, Finance Minister Muhammad Aurangzeb visited Beijing and met with senior Chinese officials.
Islamabad sought the reprofiling of over $27 billion in debt and liabilities with friendly nations, including China, Saudi Arabia, and the United Arab Emirates, local daily Dawn reported.
Last month, the IMF announced that it had reached a staff-level agreement with Pakistan on a 37-month Extended Fund Facility Arrangement (EFF) of about $7 billion, subject to approval by the IMF’s Executive Board.
"The new program aims to support the authorities’ efforts to cement macroeconomic stability and create conditions for a stronger, more inclusive, and resilient growth," said IMF in statement.
The South Asian nation is facing a financial crisis and a current account deficit. However, last week Fitch Ratings upgraded Pakistan's long-term foreign currency issuer default rating to CCC+ from CCC. The rating agency said that the upgrade reflects greater certainty over continued availability of external funding.
"Strong performance on the previous, more temporary IMF arrangement helped the country narrow fiscal deficits and rebuild foreign exchange (FX) reserves, and further improvements are likely," it said in a statement.
However, Pakistan's large funding needs leave it vulnerable if it fails to implement reforms, which could undermine the performance and funding of the IMF program, it added.
Fitch forecasts Pakistan's current account deficit to remain relatively contained at around $4 billion, or 1% of GDP, in the 2024 fiscal year, following a $700 million deficit in the 2023 fiscal year, due to tight financing conditions and subdued domestic demand.
Government debt is estimated to fall to 68% of GDP, down from 75%, during that period, according to the agency.