On Wednesday, China has agreed to roll over a $2 billion debt owed by Pakistan, according to sources from the Ministry of Finance.
Pakistan had initially borrowed $2 billion from China at a 7.1% interest rate, with the loan set to mature in the upcoming week of March, the sources disclosed. The rollover of this loan is aimed at supporting Pakistan’s State Bank of Pakistan (SBP) amidst its depleting foreign reserves, which currently stand at $8 billion.
Sources also revealed that Pakistan made payments totaling Rs26.6 billion in the previous fiscal year to China, Saudi Arabia, and the United Arab Emirates (UAE) on the $9 billion deposits that these nations had placed with the State Bank of Pakistan.
Last month, the caretaker Prime Minister Anwaar-ul-Haq Kakar wrote a letter to his Chinese counterpart Li Qiang, formally requesting the rollover of the $2 billion loan. In his letter, PM Kakar expressed gratitude to the Chinese government for their ongoing financial support.
“China provided a loan to the government of Pakistan during a challenging economic situation,” the sources cited the letter as stating.
As part of its efforts to alleviate Pakistan’s external payments burden, China has maintained a total of $4 billion in loans as a safe deposit, according to the sources.
This latest agreement comes after a similar move last year in May when Beijing extended crucial support to Pakistan by rolling over more than $2 billion in debt. China had committed to helping Islamabad meet two significant debt repayments in June, totaling $2.3 billion, by providing immediate fresh funds.
“The refinancing of commercial loans worth $1.3 billion and a Chinese government loan of $1 billion would assist Pakistan in averting immediate default,” a senior government official had stated to The News in May 2023.
China has consistently shown its support for Pakistan during its economic challenges, as evidenced by earlier loan rollovers and commitments to financial assistance. Chinese Foreign Minister Qin Gang also reiterated Beijing’s commitment to Pakistan’s financial stability during a visit to the country in May last year.
