By Staff Reporter
ISLAMABAD: China has agreed to defer principal payments on loans worth $2.4 billion to Pakistan for two years, Finance Minister Ishaq Dar said on Thursday, a boost for the cash-strapped country as it tries to rebuild its foreign currency reserves.
Dar said on social platform X, previously Twitter, that China’s EXIM Bank had rolled over the loans and that Pakistan would only pay interest on them.
The development comes a little over a week after Prime Minister Shehbaz Sharif announced that China had rolled over a $600 million loan to Pakistan, helping shore up the country’s foreign exchange reserves.
This was in addition to over $5 billion in loans that longtime ally China had rolled over for Pakistan in the last three months, according to the premier, helping Pakistan avert a default.
China is Pakistan’s largest creditor and trading partner, and has invested billions of dollars in infrastructure projects under its Belt and Road Initiative.
Pakistan also secured a $3 billion bailout from the International Monetary Fund (IMF) earlier this month, following months of negotiations and delays.
The IMF board approved the nine-month Stand-By Agreement on July 12, allowing for an immediate disbursement of about $1.2 billion.
Pakistan has also received $3 billion in financial support from Saudi Arabia and the United Arab Emirates in recent weeks, helping it avoid a default on its external debt obligations.
Pakistan will need $28.4 billion to cover its gross external financing needs in the fiscal year 2023-24, equivalent to 8 percent of its gross domestic product, according to the IMF. The IMF said the country’s external financing needs would rise to $30.4 billion in the following fiscal year.
The fund said the program was fully financed but with “exceptionally high risks” from large public sector debt rollovers, a sizable current account deficit, a difficult external environment for bond issuance, and limited foreign exchange reserves.
The central bank said last week that its foreign exchange reserves rose by $4.2 billion to $8.7 billion in the week ending July 14, thanks to the inflows from the IMF and friendly countries.
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