Daily Times

In a major development, China has agreed to refinance $2.3 billion in debt providing a breathing space to Pakistan to bolster its reserves, make import payments and support to the rupee that has lost over 25% to dollar since the start of the outgoing fiscal year 2021-22. “The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about US$ 2.3 billion) have been agreed,” Miftah wrote on his official Twitter handle on Thursday.

“Inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves,” he added. Foreign exchange reserves of the State Bank of Pakistan (SBP) declined by $190 million to $10.308 billion during the week ending on May 6, according to the central bank. The disbursement of loans by the multilateral creditors virtually paused due to the delay in reaching a deal with the International Monetary Fund (IMF), which also put on hold the budgetary support loans. The Ministry of Economic Affairs’ lack of focus on pushing the project executing agencies to fast-track the development work also caused slowdown in loan disbursement in April. Data released by the Ministry of Economic Affairs earlier this month showed that Pakistan received only $248 million in foreign loans in April, including $100 million worth of oil on deferred payments from Saudi Arabia. The World Bank gave $63 million and the Asian Development Bank (ADB) extended mere $18 million. Total disbursement by all the multilateral lenders came in at $95 million in April, according to the ministry. Pakistan could not receive $1 billion loan tranche from the IMF, while the World Bank delayed the approval of $400 million policy loan, which affected the endorsement of a similar loan from the Asian Infrastructure Investment Bank (AIIB). AIIB has pegged its loan with the World Bank’s budgetary support. The then finance minister Shaukat Tarin in March said that China had agreed to roll over $4.2 billion debt that was maturing this week.

The $2 billion loan by China’s State Administration of Foreign Exchange (SAFE), has been rolled over, Tarin said while talking to a reporter.

Tarin had said that the Chinese foreign minister also conveyed on Tuesday China’s willingness to roll over another $2.2 billion Chinese commercial loan.

Pakistan had made repeated requests to Beijing to roll over the debt and the latest request was made last week to the Chinese top leadership, according to the ministry officials.

The news comes as a lifeline, as the country is already facing an uncertain economic situation due to a delay in the revival of stalled multibillion-dollar International Monetary Fund (IMF) programme.