Pakistan is currently in talks with two Chinese banks, the Industrial and Commercial Bank of China (ICBC) and the Bank of China, as it seeks $600 million in fresh loans. These negotiations are aimed at addressing the financing gap and enhancing credit rating.
According to sources cited by The Express Tribune, each of these Chinese banks has been approached for a financing package of $300 million.
The negotiations are reportedly in an advanced stage, and officials from Pakistan’s finance ministry anticipate that the loans will be disbursed by December.
Sources have revealed that China and Pakistan are working closely to complete the remaining technical procedures necessary for the $600 million loan. While the interest rates on these new commercial facilities are expected to be somewhat higher due to the prevailing global interest rate scenario.
It is not confirmed whether Pakistan had requested another loan from the State Administration of Foreign Exchange (SAFE) of China. SAFE has previously extended $4 billion in loans to Pakistan, which are rescheduled annually due to Pakistan’s financial challenges in repaying them.
Pakistan’s budget allocation for foreign commercial loans was $4.5 billion. However, securing financing has proven challenging due to the country’s poor credit ratings, high risks associated with debt sustainability, and a fragile macroeconomic situation. Consequently, Pakistan has increasingly turned to China for emergency financing in recent years.
China’s support has come in various forms, including loans from SAFE deposits, concessionary loans, and commercial loans, aimed at helping Pakistan stabilize its external sector.
Back in June of this year, China assisted Pakistan in avoiding a further decline in its critically low foreign currency reserves by facilitating the early adjustment of a $1.3 billion repayment.
This development underscores Pakistan’s ongoing efforts to secure financing and improve its financial stability, with China being a key partner in these endeavors.
