Pakistan receives $1 billion loan from China

Islamabad: Pakistan’s central bank announced on Saturday that it has received a loan of $1 billion from China, bringing the country’s foreign exchange reserves back to over $4 billion, a media report said.

The Pakistan government also expects to refinance another commercial loan of $300 million from China in the near future, The Express Tribune reported.

Finance Minister Ishaq Dar had announced that Pakistan would receive a $1 billion Chinese commercial loan within 72 hours. Islamabad had repaid this loan in advance after reaching a new agreement with Beijing.

Pakistan made the payment after China agreed to waive the prepayment penalty that is typically charged when a borrower decides to repay ahead of schedule. Pakistan made the $1 billion payment 18 days before the scheduled date.

Speaking at the National Assembly Standing Committee on Finance, Dar stated that Pakistan and China had reached an understanding regarding the repayment and refinancing of the maturing $1.3 billion commercial loan and the $1 billion State Administration of Foreign Exchange (SAFE) deposit.

Pakistan is also scheduled to repay a debt of $300 million to the Bank of China on June 26. Dar said that similar treatment would be applied to the Bank of China loan, with early repayment and China returning the amount before June 30.

The Finance Minister also said that two loans from SAFE China, totalling $1 billion, will also be rolled over before the end of June, The Express Tribune reported.

Pakistan’s gross official foreign exchange reserves had fallen below $3 billion after making the Chinese debt payment. The reserves are expected to increase further, but there will still be some dent due to $900 million debt repayments to multilateral creditors.

One day prior, Dar had stated that China understood Pakistan’s complex economic conditions and was willing to provide financial support, The Express Tribune reported.