China rolls over $2b loan facility for Pakistan

ISLAMABAD  –  China has agreed to roll over a $2 billion debt on the existing terms after initially seeking a hike in price, as Pakistan’s policy to maintain foreign exchange reserves through deposits by three countries is becoming costly due to a 118 per cent surge in interest cost.

Pakistan has borrowed $2 billion from China on a 7.1 per cent interest rate, the sources said, adding that the loan was maturing in the week of March. According to reports, Pakistan paid Rs26.6 billion in the last fiscal year to China, Saudi Arabia, and the United Arab Emirates (UAE) on the $9 billion deposits that these three nations placed with the State Bank of Pakistan.

The rollover will support the State Bank of Pakistan (SBP) depleting foreign reserves which stand at $8 billion. Last year, China had already rolled over some loans to Pakistan and Chinese Foreign Minister Qin Gang also reiterated Beijing’s financial support for the country on a visit to Pakistan back in May last year.

Last month, caretaker Prime Minister Anwaarul- Haq Kakar had written a letter to his Chinese counterpart Li Qiang, seeking the rollover of a $2 billion loan.

In his letter to China’s premier, the interim prime minister has requested that Beijing roll over Pakistan’s $2 billion loan for a year, sources had told Geo News.