ISLAMABAD: Cash-strapped Pakistan will receive $1.3 billion in financing from the Industrial and Commercial Bank of China Ltd in coming days to help shore up its foreign exchange reserves, Finance Minister Ishaq Dar said on Friday.

The money, which he said will come in three phases, is crucial for the South Asian economy, which is facing a balance of payment crisis, with its central bank foreign exchange reserves dropping to levels barely able to cover three weeks of imports.

Pakistan has already received a $700 million loan from China to help boost its forex reserves.

Dar said the total $2 billion is in effect Pakistan borrowing back the debt repayments it has paid to Beijing for previously agreed loans.

He said Pakistan will need $5 billion external financing to close its financing gap this fiscal year, which ends in June.

More external financing will be coming to Pakistan only after Islamabad signs a deal with International Monetary Fund (IMF), which the minister said should be done by next week.

The lender has been negotiating the deal with Pakistan since early last month to clear ninth review, which if approved by its board will issue over $1 billion tranche of $6.5 billion bailout agreed in 2019.

“We will, God willing, take this country out of this quagmire,” Dar said, dismissing concerns of a default risk.

Rupee strengthens 3.5% versus dollar

The Pakistani rupee on Friday strengthened 2.38% in interbank closing at 278.46 rupees against the dollar, a day after the central bank raised its policy interest rate by 300 basis points (bps) to 20%, trading data showed.

The rupee, which fell more than 6% on Thursday, was trading at 275.5 against the dollar during the day, up nearly 3.5%, after the opening session.

“The rupee may have appreciated over the governors statement in the analyst meeting where he says the IMF has not asked to match the border rate,” says Mustafa Pasha, chief investment officer at Lakson Investments.

Pasha added that expectations of reaching a staff level agreement soon have shot up now that the government has floated the currency, withdrawn farmer/export subsidies, and imposed electricity surcharges.

He says, “On the other hand, it could be that the SBP has done a soft intervention or overseas Pakistanis decided to remit after seeing the rupee touch 286 against the dollar.”