China rolls over $2.4 billion loan to its key ally Pakistan

China has rolled over a USD 2.4 billion loan to its all-weather ally Pakistan for two years to help the cash-strapped country shore up its foreign exchange reserves, Finance Minister Ishaq Dar said on Thursday.

Dar said in a Twitter post that Pakistan was supposed to pay the loan in the next two fiscal years.

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 billion

Pakistan will make interest payments only in both years.

— Ishaq Dar (@MIshaqDar50) July 27, 2023

"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 billion," he said.

"Pakistan will make interest payments only in both years," he added.

The development comes a little over a week after Prime Minister Shehbaz Sharif announced that China had rolled over a USD 600 million loan to Pakistan to help its ailing economy.

This was in addition to over USD 5 billion in loans that China had rolled over for Pakistan in the last three months to help its key ally avert a default as negotiations to secure the IMF bailout dragged on.

China has time and again helped Pakistan meet its debt obligations through the provision of new loans and the roll over of the existing debt.

Beijing prematurely refinanced its USD 1.3 billion commercial loans in June, which helped Islamabad avoid a default on its international debt obligations during the period when the International Monetary Fund (IMF) programme was stalled.

Pakistan secured a last-gasp USD 3 billion IMF bailout on June 30, which later disbursed an initial upfront instalment of about USD 1.2 billion, the Dawn newspaper reported.

This was followed by a further USD 2 billion of financial support from Saudi Arabia and USD 1 billion from the UAE.

The reserves have stabilised since then and the central bank said last week that foreign exchange reserves almost doubled, rising USD 4.2 billion to USD 8.7 billion during the week ending July 14.