China will re-lend around $3.7 billion to Pakistan in the next month and assist in keeping its foreign exchange reserves over $10 billion, top sources told.
The loan, including refinancing and new disbursements, will be mainly extended in Chinese yuan as China is shifting away from dollar-denominated lending.
Sources confirmed that the Industrial and Commercial Bank of China (ICBC) will roll over an already repaid $1.3 billion loan in Chinese Yuan (RMB). The loan, initially extended at a floating interest rate of around 7.5 percent, was already repaid by Pakistan in the period between March and April 2024.
Sources have indicated that a $2.1 billion (RMB 15 billion) syndicated loan of three Chinese banks namely China Development Bank (RMB 9 billion), Bank of China (RMB 3 billion), and ICBC (RMB 3 billion) will fall due in June. Pakistan intends to repay the amount a few days prior to maturity and hopes the refinancing to also be made in RMB.
In recent meetings, Chinese authorities have promised Pakistan refinancing of all loans falling due between March to June 2025. The choice to not utilize US dollars is China's decision.
Foreign exchange reserves of Pakistan increased to $11.4 billion in May after a $1 billion drawdown from the IMF. The Finance Ministry approximates that Pakistan will need more than $25 billion of external financing in the upcoming fiscal year.
This consists of $12 billion rollovers from friendly nations, such as China, Saudi Arabia, and the UAE, $4.6 billion of project lending, $3.2 billion of refinancing of Chinese commercial borrowings, $1 billion of fresh commercial loans from China, $2 billion in delayed oil payments, and $2 billion in IMF payouts
Project financing would be anticipated from global institutions including the ADB and other international banks. Sources further stated that the Economic Affairs Division will be responsible for handling about $20 billion of this lending, with rollovers and IMF-related disbursements to be managed by the central bank and the Finance Ministry.