China has agreed to provide $2.5 billion in loans to Pakistan to boost declining foreign exchange reserves that are not sufficient to cover even two months of imports, even after receiving $4 billion loans from Saudi Arabia and UAE, according to a report in a local English newspaper.
According to the report, a top government official has said that China has agreed to park $2.5 billion in deposits in the central bank.
Previously in July, China had also deposited $2 billion with the State Bank of Pakistan. In the past five years, China has emerged as Pakistan’s single largest rescuer in times of economic crisis.
With the expected $2.5 billion deposits, China’s contribution in this fiscal year alone would surge to $4.5 billion, the report said.
Earlier, Prime Minister Imran Khan had visited China, Saudi Arabia, and the United Arab Emirates to arrange emergency loans to avoid a looming default.
Resultantly, Pakistan has secured $14.5 billion worth of commitments from these three countries, that bridged the external financing gap of the ongoing fiscal year, said the report.
This follows a $6 billion financial package agreed with Saudi Arabia which included a $3 billion loan obtained at an interest rate of 3.18%.
It included a $3 billion deferred oil payment facility to Pakistan for managing its oil import bill.
The State Bank of Pakistan (SBP) Governor Tariq Bajwa, on Thursday, said that the procedure for the $3 billion loans on deferred oil payments was finalized this week and an agreement would be signed on February 16 during the visit of Saudi Crown Prince Mohammad bin Salman.
The UAE has agreed to provide $3 billion in loans at an interest rate of around 3% and the first tranche of $1 billion was received by the central bank last Thursday.
However $3.2 billion worth of oil facility on deferred payment is being awaited.
Even after receiving loans from the two Middle Eastern countries, the gross official foreign currency reserves stayed at only $8.12 billion as of December 25, according to the SBP governor.
The report stated that the reserves are below the minimum level that the International Monetary Fund and World Bank prescribe. Due to this, the World Bank and the Asian Development Bank are not providing loans for budget financing.