Pakistan repays $1 billion loan to Industrial and Commercial Bank of China in March

Pakistan has repaid a $1 billion commercial loan to the Industrial and Commercial Bank of China (ICBC) in two equal installments in March 2025. This loan was taken two years ago at a floating interest rate of approximately 7.5%, according to a news report.  

A $300 million loan tranche from ICBC is due next month. The government is also hoping that ICBC will refinance this loan, though discussions on the interest rates are still ongoing.

The repayment of $1 billion Chinese loans has led to a temporary drop in the country’s foreign exchange reserves, bringing them to a six-month low of $10.6 billion. The central bank’s reserves fell after the second $500 million tranche of the loan was paid in mid-March. The first installment was settled in early March. 

Despite these repayments, the central bank managed to partly cover the gap through foreign inflows and market purchases of dollars. Pakistan’s central bank governor previously stated that the institution had purchased $9 billion in 2024 to support the reserves, which would otherwise have been just around $2 billion without the IMF program.

The government remains heavily reliant on Chinese financing, with Beijing rolling over $4 billion in cash deposits, $6.5 billion in commercial loans, and $4.3 billion in trade financing. 

Another $2.7 billion in Chinese loans is set to mature between April and June, including a $2.1 billion syndicate financing loan and a $300 million loan from the Bank of China, both maturing in June.

While the IMF’s staff-level agreement for the first review of Pakistan’s Extended Fund Facility (EFF) program this week could unlock an additional $1 billion in financing, the timing of the IMF board’s approval remains uncertain. The board meeting may occur in May or June, contingent on the fiscal year 2025-26 budget discussions, with some key issues still unresolved, including taxes on real estate and the beverage and tobacco sectors.

Last month, Pakistan requested the Export-Import Bank of China to reschedule $3.4 billion in debt from October 2024 to September 2027. The status of that request has not been officially disclosed by the Ministry of Finance. 

Pakistan is also working to secure financing to address a $5 billion external financing gap for the three-year IMF program period.

Although the IMF said that Pakistan’s external sector has stabilised, it has warned that vulnerabilities remain and must be managed through tight fiscal and monetary policies, along with exchange rate flexibility.