Pakistan has cleared its USD 750 million Eurobond debt using a loan worth USD one billion granted by China.
With reference to an official statement released by the State Bank of Pakistan, amidst mounting pressure on the country's foreign debt payment and maintaining a significant level of foreign currency reserve, Pakistan reportedly borrowed USD one billion from China Development Bank to pay off older dues, reports the Express Tribune.
However, despite this development, it is said that there has not been significant reduction in the country's external debt.
Over the past nine months, China has granted two loans worth USD one billion each to Pakistan on an interest rate ranging from 4.22 percent to 4.44 percent, according to documents drafted by the Finance Ministry. However, the government waived off all taxes on these loans to project a reasonable cost of borrowing.
In 2007, the Musharraf-led Centre had issued 10-year bonds at a 6.875 percent interest rate. Although, the government contracted the Chinese loans at around 4.4 percent interest rate, it would increase refinancing risks due to relatively shorter maturity period.
The central bank on 1 June revealed that the total liquid foreign reserves held by the country stood at USD 21.77 billion. Foreign reserves held by the State Bank of Pakistan increased to USD 16.921 billion in lieu of the Chinese loan. The net foreign reserves held by commercial banks stood at USD 4.848 billion.
Due to growing public criticism, Finance Minister Ishaq Dar emphasised upon the net public debt (the public debt excluding deposits of the government).
"The debt to GDP ratio is now correctly being shown in net terms rather than gross terms", said Senator Ayesha during the committee meeting.
As of March 2017, the country's public debt was Rs. 20.872 trillion according to the Finance Ministry. If the Parliament approves the proposed amendment, the net public debt would come down by Rs. two trillion.