Pakistan obtains another $500 million loan from ICBC

Loan obtained to support sliding forex reserves and support a strong rupee against the dollar


ISLAMABAD: Pakistan has obtained another $500 million loan from Industrial and Commercial Bank of China (ICBC) due to dwindling foreign exchange reserves and rising current account deficit.

This raises ICBC contribution to $1 billion to assist a strong rupee against the U.S dollar in three months, reported Express Tribune.

The govt obtained the loan on January 15th at an interest rate of 4.5 percent, sources in the finance ministry told. During January, Pakistan raised $704 million worth of new loans, taking total foreign borrowings to $6.6 billion in first seven months of financial year 2017-18.

These foreign loans constitute 86 percent of Pakistan’s annual budgetary estimates which was approved by the parliament in June 2017. It hints the amount of foreign loans may cross $10 billion for a second year in a row.

China provided $1.6 billion, which made it the highest lender and constitutes 25 percent of Pakistan’s total foreign loans amassed in last seven months of FY 2017-18.

Also, China provided $610 million funding for project financing purposes during July-January FY 2017-18. Sovereign bonds remained the biggest source of loans after Pakistan raised over $2.5 billion in November, which constituted 38 percent of the total contracted foreign loans.

This is the second loan ICBC has extended to Pakistan for supporting its declining forex reserves, which are being used to secure a strong rupee and finance the trade deficit.

ICBC had previously extended $500 million loan to Pakistan in October 2017. And sources in the central bank revealed it was still intervening in currency market to ensure dollar-rupee level remained at current level.

The country’s total foreign commercial borrowings during first seven months of FY 2017-18 rose to $1.8 billion, sources told.

Till now, Pakistan has been loaned $255m by Credit Suisse AG, Standard Chartered Bank London $200 million, Citibank $267 million and Dubai Bank $55.9 million. Foreign commercial bank loans constituted 27 percent of the country’s total foreign loans obtained.