ISLAMABAD:China has assured Pakistan of relending $3.7 billion in commercial loans, denominated in Chinese currency, before the end of June, including $2.4 billion that is maturing next month, in a move that will help keep the foreign exchange reserves in double-digits.
Unlike in the past, when Beijing has given loans in non-Chinese currency too, this time Pakistan’s strategic ally has decided not to give loans in the United States currency as part of its drive to decouple the economy from the dollar; the government sources told The Express Tribune.
They said that China gave these assurances during recent meetings, aimed at securing the refinancing of loans maturing between March and June 2025. Pakistan has already returned a $1.3 billion loan of the Industrial and Commercial Bank of China (ICBC) in three tranches between March and April this year, officials said.
Subject to some clarifications that the commercial bank has sought from Pakistan, it is expected that the ICBC would relend the money in Chinese currency in the next few days, said the government sources. The ICBC had given the loan two years ago at floating interest rates, which translated to around 7.5%.
The central bank’s reserves remained around $11.4 billion after a $1 billion injection by the IMF this month. After the next Chinese refinancing, it may increase to $12.7 billion before seeing another dip from the middle of next month, said the sources.
A $2.1 billion or 15 billion RMB syndicate financing loan by three Chinese commercial banks is maturing in June. Pakistan will pay at least three days ahead of the maturity to make sure that the money is given back before the close of the fiscal year. China would give this money in RMB currency, said the sources.
The China Development Bank had given 9 billion RMB, Bank of China 3 billion RMB and ICBC 3 billion RMB. The loan is being extended for a period of three years, said the government sources.
However, the interest rate issue was still undecided. Chinese authorities have given two options to Pakistan. It has proposed that Pakistan should either get the loan at a fixed interest rate or at a floating rate but that would not be based on Shanghai Interbank Offered Rate (Shibor), said the sources.
