A $2 billion Chinese loan to Pakistan that matured on March 23 is currently in the process of being rolled over, a government official told Reuters.
China last week granted a one-year rollover of $2 billion in State Administration of Foreign Exchange (SAFE) deposits to Pakistan that matured on March 23. With the country locked in failed talks with the International Monetary Fund (IMF) to secure bailout funding, the rollover is essential for foreign exchange reserves which have dwindled to roughly a month’s worth of import cover.
Officials from Pakistan’s finance ministry recently expressed hope that the country would soon obtain financing from Saudi Arabia and the United Arab Emirates, despite the looming threat of default on various external debt maturities. They also stated that a $300 million payment from China was expected this month, pushing the country’s foreign reserves past the $5 billion mark.
Pakistan claimed a day earlier that it had received an indication from Saudi Arabia for additional loans that could help break the impasse with the IMF, and that it did not intend to exit the $6.5 billion program prematurely.
Pertinently, one of the requirements in the IMF is related to Net International Reserves (NIR), which can only be met after receiving assurances from friendly countries that a balance of payment gap will be filled.
Pakistan has assured the IMF that its foreign exchange reserves will be increased to $10 billion by the end of June. The lender wants the country to receive guarantees of up to $7 billion to cover the country’s balance of payments gap this fiscal year.