$2.3bn Chinese commercial loan credited to Pakistan

ISLAMABAD: Pakistan has received the much-awaited $2.3 billion commercial loan from China, helping it to boost the dwindling foreign exchange reserves held by the State Bank of Pakistan (SBP) to cross the $10.5 billion mark.

The foreign exchange reserves held by the SBP had nosedived to $8.2 billion after it decreased by $748 million. According to the SBP, during the week ending 17-June-2022, the SBP reserves decreased by $748 million to $8.2 billion, mainly due to external debt repayments. The SBP reserves are expected to increase in the coming days on the realisation of the proceeds of CDB loan.

In a tweet, Minister for Finance Miftah Ismail on Friday announced, “I am pleased to announce that Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into the SBP account today, increasing our foreign exchange reserves”. 

China will charge 1.5 per cent SHIBOR (Shanghai Inter-Bank Offered Rates) on this commercial loan of $2.3 billion. Soon after making progress on the IMF deal whereby both sides evolved a broader consensus on the budgetary framework, China moved forward and provided the commercial loans by three banks.

Earlier, the Ministry of Finance was expecting this amount in March 2022 but it did not materialise on an immediate basis as Beijing awaited the finalisation of the IMF deal. However, difficulties were being faced by the economic team as the US and Chinese tensions created problems for Islamabad to strike a balance. Pakistan has also made requests to China for the rollover $2 billion deposits, which were due in June and July 2022. Pakistani authorities expect that these rollovers will be done without any further delays or the foreign exchange reserves will again decline.