Pakistan on Wednesday signed a 15 billion yuan ($2.3 billion) loan deal with a Chinese consortium of banks to help the country’s tight economy in the wake of the depletion of foreign exchange reserves and the depreciation of its local currency.
Pakistan’s Finance Minister Miftah Ismail said in a tweet that the “Chinese consortium of banks signed the RMB 15 billion (USD 2.3 billion) loan agreement today (Wednesday) after it was signed by the Pakistani side yesterday (Tuesday)” .
While thanking the Chinese government for “facilitating this transaction”, Ismail said the “influx was expected in a few days”.
Foreign Minister Bilawal Bhutto-Zardari also expressed his gratitude to the Chinese leadership. “The people of Pakistan are grateful for our friends’ continued support for all weather conditions,” he said.
The loan deal with Chinese banks will boost crisis-hit Pakistani reserves and allow Islamabad to make import payments while supporting the rupee.
The Pakistani rupee has lost more than 34 percent since the start of the outgoing fiscal year 2021-2022.
The latest development comes as a huge relief to economic policymakers, after the State Bank of Pakistan’s (SBP) foreign exchange reserves fell below $9 billion on June 10, with import coverage of less than six weeks.
The deal with China also came on a day when reports emerged that Pakistan had reached an agreement with the International Monetary Fund (IMF) to restore the global lender’s stalled $6 billion aid package.
It will also support Pakistan’s dwindling cash reserves, which total $8.99 billion, according to central bank data, the Dawn newspaper reported.
The deal with the IMF is expected to open doors for financing from other international sources.
The facility’s revival will provide immediate access to $1 billion, which Pakistan desperately needs to support its dwindling foreign exchange reserves.
The finance minister had warned last week that Pakistan’s economy could be in a similar position to Sri Lanka’s if tough decisions aren’t taken.