29 February 2024

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China Advances $2.4 billion loan to Bankrupt Pakistan

According to Finance Minister Ishaq Dar, China has extended a USD 2.4 billion loan to its all-weather partner Pakistan for two years in order to help the cash-strapped country shore up its foreign exchange reserves.

Dar stated on Twitter that Pakistan was expected to repay the debt within the next two fiscal years. “The Chinese EXIM Bank has rolled over for two years the principal amounts of the following loans totaling US$ 2.4 billion due in the next two fiscal years: “FY2023-24: 1.2 billion USD; FY2024-25: 1.2 billion USD,” he remarked.

“Pakistan will only make interest payments in both years,” he said. The news comes just over a week after Prime Minister Shehbaz Sharif revealed that China had extended a USD 600 million loan to Pakistan to support the country’s struggling economy.

China

This was in addition to the more than USD 5 billion in loans that China had extended to Pakistan in the previous three months to assist its important ally in avoiding a default as discussions to get the IMF rescue dragged on. China has often assisted Pakistan in meeting its debt obligations by providing fresh loans and rolling over previous debt.

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China Again Helped Pakistan

Beijing refinanced its USD 1.3 billion commercial loans prematurely in June, allowing Islamabad to avoid a default on its international financial commitments during the period when the International Monetary Fund (IMF) programme was halted. On June 30, Pakistan got a last-ditch USD 3 billion IMF rescue, which was later followed by a USD 1.2 billion upfront payment, according to the Dawn daily.

This was followed by a USD 2 billion financial contribution from Saudi Arabia and a USD 1 billion contribution from the UAE. Since then, the reserves have stabilized, and the central bank reported last week that foreign exchange reserves nearly doubled, climbing USD 4.2 billion to USD 8.7 billion in the week ending July 14.