ISLAMABAD: The Export-Import Bank of China (EXIM) has extended a much-needed financial lifeline to Pakistan by rolling over a $2.4 billion loan, bringing relief to the outgoing Pakistan Democratic Movement-led government as it faces impending debt payments in the next two fiscal years.
Finance Minister Ishaq Dar announced in a tweet that the EXIM Bank has agreed to roll over the loan for two years, with $1.2 billion due in the fiscal year 2024 and the same amount due in 2025. The agreement stipulates that Pakistan will only be required to make interest payments during these two years, providing a temporary reprieve amidst economic challenges.
Chinese EXIM Bank has rolled over for 2 years principal amounts of following loans totalling US$ 2.4 billion which are due in next 2 fiscal years:
FY2023-24: US$1.2 billion
FY2024-25: US$ 1.2 billionPakistan will make interest payments only in both years.
— Ishaq Dar (@MIshaqDar50) July 27, 2023
This comes on the heels of another significant financial boost received from the same institution, as Prime Minister Shehbaz Sharif recently revealed that the EXIM Bank of China had rolled over an additional $600 million to Pakistan. The combined financial support from China, totaling more than $5 billion in loans over the last three months, has significantly aided Pakistan in avoiding a potential sovereign default and securing a deal with the International Monetary Fund (IMF).
Financial Support Bolsters Pakistan’s Foreign Exchange Reserves
The funds provided by friendly countries, including China, Saudi Arabia, and the UAE, have bolstered Pakistan’s foreign exchange reserves held by the central bank, which reached a nine-month high at $8.7 billion as of July 14. The financial support from bilateral and multilateral partners has proven crucial in maintaining stability and liquidity in the country’s economic landscape.
With the IMF’s approval of a $3 billion Standby Arrangement for Pakistan on June 30, the nation has gained access to necessary financial resources, with $1.2 billion already released initially, and the remainder set to be provided after two reviews.
The timely support from China and other partners has enabled Pakistan to navigate its fiscal challenges and secure vital funding to meet its financial obligations. As the Pakistan Democratic Movement-led government’s tenure comes to an end in August, the rolled-over loan provides a positive step forward in managing the country’s debt burden.
