Pakistan will receive another $700 million loan from China this week which will help shore up plunging foreign exchange reserves, Federal Minister for Finance and Revenue, Mohammad Ishaq Dar said on Wednesday.
The Board of China Development Bank (CDB) approved the loan to help Pakistan recover from the worsening economic crisis.
“Formalities completed and the Board of China Development Bank has approved the facility of US $ 700 million for Pakistan. This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves,” he said in a recent tweet.
In pursuit of reviving the International Monetary Fund (IMF) program, the Pakistani government has requested assurances from Saudi Arabia and China for additional loans.
According to a finance ministry official who spoke to Reuters, the loan is in addition to other facilities that China has previously provided to Pakistan. The government is optimistic that all matured loans from Chinese banks will be refinanced soon, including two additional commercial loans totaling $500 million and $800 million. Overall, Pakistan aims to refinance Chinese loans worth up to $2 billion by the end of February or the first week of March 2023, according to official sources.
China Development Bank did not respond to a faxed request for comment.
Earlier this month, the nation’s foreign currency reserves fell to a concerning level of less than $3 billion, marking the first time in nine years this has occurred. As a result, the country’s ability to import goods has been reduced to just over two weeks.
When Ishaq Dar became finance minister in September, his top priority was to avoid the International Monetary Fund’s (IMF) strict conditions by obtaining financial assistance from friendly nations. In November, he announced that Pakistan had secured a $13 billion bailout from China and Saudi Arabia, including $5.7 billion in new loans. Dar was confident that the funds would arrive before the IMF’s program was revived.
However, it later became apparent that Islamabad’s traditional allies were unwilling to provide additional funds without Pakistan first agreeing to the IMF’s conditions. This led Pakistan to invite an IMF mission to negotiate a deal.
Having worked hard to convince the IMF, Pakistan is now hoping that its friends will come to its aid.