ISLAMABAD: China has increased the size of a currency swap agreement with Pakistan by 10 billion yuan ($1.57 billion), two Pakistani central bank sources said on Thursday, with cash earmarked for boosting fast-depleting foreign currency reserves.
Two State Bank of Pakistan (SBP) sources told Reuters that the currency swap agreement between SBP and China’s central bank has been hiked to 20 billion yuan ($3.13 billion) from 10 billion yuan.
“This arrangement has been finalised,” said one SBP source, who spoke on condition of anonymity. A second source confirmed the agreement and the figures.
Earlier on Wednesday, SBP Governor Tariq Bajwa confirmed China has been assisting Pakistan to stave off a foreign currency crisis.
In an interview to, Tariq Bajwa said $1 billion financing had been obtained from Chinese banks in April to help avoid a foreign currency crisis and were at “good, competitive rates.”
The country’s foreign exchange reserves have been sliding since reaching a high in October 2016 and stood at $10.8 billion on May 11.
Chinese-backed loans are expected to bolster the falling finances of Pakistan and expected to further cement the financial, political and military ties between the two countries, said FT.
Pakistan obtained $1.5 billion from China during the first ten months of the current financial year 2018-19.
Documents revealed that China has given $334 million in loans for the Orange line Lahore project, $691 million for Sukkur Multan, $273 million for Havelian Thakor and $88 million in the recently inaugurated Neelum Jhelum Hydropower project.
According to officials in Islamabad, China was fine with giving loans to Pakistan despite the financial crunch but does not want details of the loan to be made public.
In a statement to Financial Times, one civil servant said “The Chinese are not keen on western institutions learning the minute details of [financing of] CPEC projects. An IMF programme will require Pakistan to disclose the financial terms to its officials.”
As per a report in The News, in the wake of rising current account deficit that swelled to $14.035 billion in the first 10 months and resulting into slashing down of foreign currency reserves with every passing week, Pakistan was looking towards China as the last available option with expectations of receiving $01 to $02 billion on account of safe deposits before June 30, 2018.
One top official of the Finance Ministry confirmed to The News last week that Pakistan did not make any formal request to China for keeping dollars in the shape of safe deposits into the SBP, but Beijing had conveyed through informal channels that they might sanction putting $01 to $02 billion for keeping into Pakistan’s central bank in a bid to jack up the dwindling foreign currency reserves.
Currently, China’s $500 million is lying in a safe deposit with the SBP.
Pakistan had returned safe Chinese deposit to Beijing when the country’s reserves had reached comfortable position after graduating the IMF programme successfully during the tenure of former finance minister Ishaq Dar in September 2016.
