ISLAMABAD – Pakistan turns again to iron friend China for support amid International Monetary Fund (IMF) pressure mounting.
As Pakistan is looking to revive economy, Beijing agreed to reschedule $1.8 billion in loans for South Asian, providing partial relief as the country races to meet foreign exchange reserve targets set under its ongoing programme with International Monetary Fund (IMF).
The debt relief, which includes concessional loans and preferential buyer credit from China’s Export-Import (Exim) Bank, falls short of the $3.4 billion Pakistan initially sought last year. However, officials say the support is critical to bolstering the country’s reserves and maintaining economic stability.
According to senior government sources, the restructured loans linked to various infrastructure projects will be finalized by next month. The relief excludes commercial debt from Chinese banks, and China has declined to include certain buyer’s credit facilities in the package.
The development comes after Pakistan’s foreign reserves temporarily dropped below $10 billion following significant repayments to China last week. Finance Minister Muhammad Aurangzeb has since confirmed that reserves are expected to exceed $14 billion by the end of the fiscal year, which closes on Monday, once Beijing refinances the repaid loans.
Earlier this month, Pakistan asked China to reschedule broader $3.4 billion in loans due between October 2024 and September 2027 to help cover a $5 billion external financing gap flagged by global lender. Chinese authorities opted to exclude pandemic-era loans and offered to restructure only those maturing between September 2025 and September 2027.
This is the second time in two years that the Exim Bank has offered debt relief to Pakistan. In 2023, the bank granted a two-year extension on $2.43 billion in outstanding loans.
In addition to China’s support, Pakistan is anticipating a $1 billion inflow by June 26 through an Asian Development Bank (ADB)-backed loan, alongside another $415 million in external funding.
Pakistan faces nearly $20 billion in external debt repayments in the next fiscal year, including $13 billion in bilateral deposits.
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