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Monday, Jul 07, 2025
Outside the box.
Pakistan Seeks $1.4 Billion Loan from China Amid Financial Struggles
Request Made to Address External Financing Issues and Support Currency Reserves
Pakistan has formally requested a 10 billion yuan (approximately USD 1.4 billion) loan from China to tackle ongoing external financing challenges.
The request was announced during a meeting between Pakistan's Finance Minister Muhammad Aurangzeb and China's Vice Minister of Finance, Liao Min, at the sidelines of the annual IMF and World Bank meetings.
The aim is to increase the limit under the existing Currency Swap Agreement from CNY 30 billion to CNY 40 billion.
Currently, Pakistan has exhausted the CNY 30 billion facility, utilizing it for debt repayment.
This financial measure follows China's recent three-year extension of the current USD 4.3 billion facility, formalized during Chinese Prime Minister Li Qiang's visit, extending the repayment period to 2027.
This comes alongside Pakistan securing a separate USD 600 million commercial loan at an 11% interest rate, which raised concerns but was clarified by the IMF as unrelated to Pakistan's USD 7 billion bailout package.
Pakistan has consistently leaned on Chinese financial support to stabilize foreign currency reserves, which stand at approximately USD 11 billion, including SAFE deposits and commercial loans from China.
The request for increased borrowing aligns with historic patterns, similar to past requests made amidst loan delays from other creditors.
The bilateral currency swap agreement, initiated in December 2011, aims at enhancing trade and investment.
Aurangzeb expressed gratitude to the Chinese government for its support, reiterated the partnership's mutual benefits, and discussed potential initiatives, such as issuing a Panda bond to diversify financing options.
Security for Chinese workers in Pakistan and improvements in both nations' online payment systems were also highlighted as key focuses of the ongoing economic partnership.
The request was announced during a meeting between Pakistan's Finance Minister Muhammad Aurangzeb and China's Vice Minister of Finance, Liao Min, at the sidelines of the annual IMF and World Bank meetings.
The aim is to increase the limit under the existing Currency Swap Agreement from CNY 30 billion to CNY 40 billion.
Currently, Pakistan has exhausted the CNY 30 billion facility, utilizing it for debt repayment.
This financial measure follows China's recent three-year extension of the current USD 4.3 billion facility, formalized during Chinese Prime Minister Li Qiang's visit, extending the repayment period to 2027.
This comes alongside Pakistan securing a separate USD 600 million commercial loan at an 11% interest rate, which raised concerns but was clarified by the IMF as unrelated to Pakistan's USD 7 billion bailout package.
Pakistan has consistently leaned on Chinese financial support to stabilize foreign currency reserves, which stand at approximately USD 11 billion, including SAFE deposits and commercial loans from China.
The request for increased borrowing aligns with historic patterns, similar to past requests made amidst loan delays from other creditors.
The bilateral currency swap agreement, initiated in December 2011, aims at enhancing trade and investment.
Aurangzeb expressed gratitude to the Chinese government for its support, reiterated the partnership's mutual benefits, and discussed potential initiatives, such as issuing a Panda bond to diversify financing options.
Security for Chinese workers in Pakistan and improvements in both nations' online payment systems were also highlighted as key focuses of the ongoing economic partnership.
