Faheem Saigol says loan inflows boost reserves temporarily, but long-term sustainability requires reforms and industrial support, says front
The Pakistan Industrial and Traders Associations Front (PIAF) has welcomed the recent $3.7 billion loan agreements finalized with Chinese financial institutions, calling them a timely boost to the country’s critically low foreign exchange reserves. However, the front warned that Pakistan’s economy cannot continue to depend on foreign loans and bailouts for its survival and urged the government to focus on long-term economic stability through exports, industrial expansion, and structural reforms.
It is to be noted Pakistan and China signed commercial loan agreements this week amounting to $3.7 billion, which have raised the State Bank of Pakistan’s foreign exchange reserves to $12.4 billion, up from $8.9 billion last week. The inflow will help the country meet the International Monetary Fund’s condition to close the fiscal year with $14 billion in reserves.
PIAF Chairman Faheem-ur-Rehman Saigol, in a joint press release along with senior vice chairman Nasrullah Mughal and vice chairman Tahir Manzoor Chaudhary, acknowledged that the agreement with Chinese banks, including the Industrial and Commercial Bank of China (ICBC), Bank of China, and China Development Bank, provided much-needed short-term financial relief to the country at a crucial time. He said the successful disbursement of the funds, especially after uncertainty over the $1.6 billion portion, reflects Pakistan’s continued diplomatic and financial coordination with Beijing.
He particularly appreciated the role of Deputy Prime Minister Ishaq Dar in ensuring that the deals were finalized before the end of the fiscal year. His intervention, according to reports, led to the signing and disbursement of a $2.1 billion syndicate loan earlier this week, followed by additional agreements totaling $1.6 billion. These developments allowed Pakistan to stabilize its reserves ahead of the new fiscal year.
However, the PIAF chief stressed that while the inflows have eased immediate pressure on the external sector, they do not address the fundamental weaknesses of Pakistan’s economy. He said that dependence on loans-especially high-interest commercial loans-is not a viable strategy for long-term economic progress. “The nation cannot continue to function on borrowed money,” he said. “The cycle of taking loans to repay previous ones is unsustainable and ultimately damaging for our industrial sector and national sovereignty.”
Saigol noted that the $3.7 billion inflow is largely composed of renewed commercial loans, including a $1.3 billion refinancing by ICBC at floating interest rates, which previously stood around 7.5 percent. Additionally, $2.1 billion has been disbursed in Chinese RMB currency by three banks, reflecting China’s broader strategic move to reduce reliance on the US dollar. While this diversification benefits China, Pakistani industry still struggles with dollar liquidity and import restrictions, he said.
He emphasized that despite the improvement in reserves, many banks are still reluctant to open letters of credit for importers, affecting supply chains and local production. The rupee also continues to face downward pressure due to currency shortages, even after these loan deals. “Our traders and manufacturers are still unable to import raw materials and machinery on time. What’s the point of higher reserves if the real economy doesn’t feel any relief?” he questioned.
The PIAF chairman also expressed concern over the growing volume of debt and the government’s inability to boost exports or attract consistent foreign direct investment. He said that while China has shown willingness to reschedule $1.8 billion in concessional loans, it has refused to defer the buyer’s credit loans. These complications further highlight the fragile nature of Pakistan’s external position.