ISLAMABAD:China has shown willingness to reschedule $1.8 billion debt for a period of two years, which is about half of the amount that Pakistan had requested last year but is still critical for meeting requirements of the International Monetary Fund (IMF) programme.
Islamabad sought the rescheduling of the government’s concessional loans, preferential buyer credit, and the buyer’s credit from the Export-Import (Exim) Bank of China, according to government officials. China has not agreed to reschedule the buyer’s credit loans, they added.
There is now a possibility that China may reschedule $1.8 billion worth of government concessional loans and the preferential buyer credit by next month, they added. These loans have been taken for various projects and are over and above the commercial financing that Chinese banks have given to Pakistan.
The Ministry of Finance spokesman Qumar Abbasi did not respond to requests for comments despite repeated reminders during the past many days.
The development came amid thin foreign exchange reserves temporarily slipping below $10 billion after Islamabad made bullet commercial debt repayments to Beijing last week. However, the figure is expected to jump to close to $14 billion in the next one week, once China refinances these facilities.
Finance Minister Muhammad Aurangzeb has already announced that the foreign exchange reserves would close over $14 billion by the end of this fiscal year. The fiscal year 2024-25 would close on the coming Monday.
Pakistan had initially requested China to reschedule $3.4 billion Exim Bank debt for two years to bridge a foreign funding gap identified by the IMF. Deputy Prime Minister Ishaq Dar also took up the issue during his visit to Beijing in February this year.
The government had requested the Exim Bank of China to consider rearrangement of its loans falling due from October 2024 till September 2027. China was not willing to negotiate the further rescheduling of the COVID-19 period loans, which consumed significant time, according to government officials.
Under the $7 billion deal, the IMF had identified a $5 billion external financing gap for the three-year programme period.
The Exim Bank has extended direct lending to the federal government and guaranteed lending to State-Owned Enterprises, said the sources. Pakistan has sought a two-year extension in repayment of the official and guaranteed debt obtained from Exim Bank. The country would keep making interest payments.
