Pakistani Finance Minister Miftah Ismail said on Friday that a USD 2.3 billion loan from a consortium of Chinese banks has been credited to the central bank’s account.
Taking to Twitter, Ismail wrote, “I am pleased to announce that a Chinese consortium loan of RMB 15bn (approximately USD 2.3 billion) has been credited to the State Bank of Pakistan (SBP) account today, Due to which our foreign exchange reserves have increased.
I am pleased to announce that today a Chinese union debt of RMB 15 billion (about $2.3 billion) has been credited to the SBP account, increasing our foreign exchange reserves.
— Miftah Ismail (@MiftahIsmail) 24 June 2022
To deal with the country’s dwindling cash reserves, Ismail had earlier said that a USD 2.3 billion loan to Pakistan from a consortium of Chinese banks is expected within “a few days”.
Notably, a Chinese consortium of banks and Pakistan had earlier signed a USD 2.3 billion credit facility agreement. In an update on the agreement, on Wednesday, Pakistan’s Finance Minister Miftah Ismail said that the inflow of cash under the loan agreement is expected within days.
Ismail wrote on Twitter, “The Chinese consortium of banks has today signed a RMB 15 billion ($2.3 billion) loan facility agreement after the Pakistani side signed it yesterday. Flow is expected within a few days. We would like to thank The Chinese government is there to facilitate this transaction.”
The Chinese consortium of banks has today signed a RMB 15 billion (~$2.3 billion) loan facility agreement after the Pakistani side signed it yesterday. Expected to arrive in a day or two. We thank the Chinese government for facilitating this transaction.
— Miftah Ismail (@MiftahIsmail) 22 June 2022
Pakistan is in a deep financial crisis and this development comes after reports emerged of Pakistan reaching an agreement with the International Monetary Fund (IMF), according to media outlets.
Ismail said that following the visit of Foreign Minister Bilawal Bhutto-Zardari and follow-up discussions by Prime Minister Shahbaz Sharif with Prime Minister Li Keqiang, the Chinese side had agreed to not only roll over the amount, but also do so at an affordable interest rate. did. 1.5 pc plus Shanghai Interbank offered rate (shibor) instead of the earlier 2.5 pc plus shibor.
However, in Wednesday’s announcement, Ismail did not elaborate on the agreement with the consortium.
This loan agreement between China and Pakistan also comes amidst reports that Pakistan is blindly following the path of Sri Lanka, due to which the country will be caught in the debt trap of China. Pakistan’s already fragile economy suffered another blow when China recently demanded a repayment of USD 55.6 million by November 2023 for the Lahore Orange Line project, Italian publication Osservatorio Globalizzazione reported.
Meanwhile, at the end of March, the foreign exchange reserves held by the State Bank of Pakistan fell sharply by USD 2.915 billion, due to repayment of foreign debt. Thus, the economic future of Pakistan is bleak as far as relations with China are concerned.