ISLAMABAD: Finance Minister Miftah Ismail said on Wednesday that Chinese banks had signed an agreement for about a $2.3 billion loan that would flow into Pakistan’s account within a couple of days.

Since February, Pakistan has been seeking a rollover of loans expiring very shortly to support the fast-depleting foreign exchange reserves of the State Bank of Pakistan that stood at $8.99bn as of June 10.

“The Chinese consortium of banks has today signed the RMB [renminbi] 15bn (about $2.3bn) loan facility agreement after it was signed by Pakistani side yesterday,” Mr Ismail tweeted. “Inflow is expected within a couple of days. We thank the Chinese government for facilitating this transaction.”

Former finance minister Shaukat Tarin and incumbent minister Ismail have repeatedly been claiming that an agreement had been reached for loan rollover, but this did not materialise as Islamabad remained held up to divergent interests of the big powers — China and the United States — in the face of the Russia-Ukraine war.

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During the February visit of former prime minister Imran Khan to China, Pakistan sought about a $20bn support package. This included a $4bn debt rollover, an extension in currency swap from the existing $4.5bn to $10bn and $5.5bn in additional financial support.

China had since rolled over about $2bn some two months ago but the remaining items have been swept under the carpet.

On June 10, Islamabad had again requested China a $2bn debt rollover. In one of the recent public appearances, Mr Ismail said the government had received a letter from the Chinese government for loan rollover, but the signing of the agreement with relevant banks took time to materialise.

Interestingly, the budget books for the 2022-23 fiscal year had missed reporting about $7bn-9bn worth of Chinese and International Monetary Fund (IMF) loans.

The minister had conceded in his post-budget news conference that underreporting of these loans was a mistake that would be rectified.

Once taken into account, foreign economic assistance to Pakistan during the next fiscal year is estimated to be around $24bn. Two Chinese SAFE deposit loans of $1bn each are maturing within this month and the next.

China also rolled over $2bn in SAFE deposit loans in March. These loans are mostly secured to shore up foreign exchange reserves, budget support and project financing.

The government is expecting foreign assistance inflows to gear up after it formally inks an agreement with the IMF for $5bn extended size of the remaining package.

The two sides have largely reached an understanding on budget 2022-23 and the authorities expect to sign a staff-level agreement with the IMF over the next few days.

Published in Dawn, June 23rd, 2022