Pakistan has opted to get a $600 million loan from China to lift its decreasing financial reserves. The reserves have exhausted by $1.7 billion since the expiry of the International Monetary Fund program recently.
It is the second time in three years that the PML-N government asked a friendly nation to boost its reserves. Prior to this, Saudi Arabia had gifted $1.5 billion to Pakistan in two equivalent tranches in 2014.
State Bank of Pakistan Governor Ashraf Wathra, Finance Minister Ishaq Dar and Finance Secretary Tariq Bajwa were the participants of a meeting held recently that looked over the specifics regarding the new loan.
The Bank of China will grant loan on business terms, according to official sources. They said the sum will be released for the current month. The loan will be paid back in a period of three years at a interest rate of between 3.1% and 3.2%, said the sources.
China Development Bank has as of now, loaned $700 million for adjustment of payment support during the current financial year. $1.3 billion in total has been lent by the Chinese as part of the SBP’s reserves in this year alone.
The $1.3 billion Chinese borrowings are a part of $2 billion foreign commercial bank borrowings that Pakistan has planned for current financial year 2016-17. Notwithstanding this, Pakistan additionally acquired $200 million from Noor Bank of United Arab Emirates. The foreign credits would back up the reserves other than meeting the spending financing needs.