China rolls over Pakistan's $1.8 billion loan

In a show of continued support, China has agreed to restructure $1.8 billion in loans to help ease Pakistan’s financial strain as the country navigates economic recovery under pressure from the International Monetary Fund (IMF).

The restructured package—comprising concessional lending and buyer’s credit facilities from China’s Export-Import Bank (Exim Bank)—falls short of the $3.4 billion Pakistan had initially requested last year.

However, senior officials say the relief is a critical step in shoring up foreign exchange reserves and maintaining macroeconomic stability.

Government sources confirmed that the agreement covers loans tied to key infrastructure projects and is expected to be finalized by next month. Notably, commercial loans from Chinese banks and certain buyer credits were excluded from the deal.

The development follows a recent dip in Pakistan’s foreign exchange reserves, which slipped below $10 billion after substantial repayments to China.

Finance Minister Muhammad Aurangzeb has assured that the reserves will rise to over $14 billion by the end of the current fiscal year, which closes this Monday, after Beijing completes refinancing of the pending amounts.

Earlier in June, Pakistan formally approached China to reschedule $3.4 billion in loans set to mature between October 2024 and September 2027.

In response, Chinese officials offered partial restructuring, covering only the loans due between September 2025 and September 2027, while excluding those disbursed during the COVID-19 period.

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This marks the second time in two years that Exim Bank has provided debt relief to Pakistan. In 2023, it granted a two-year extension on $2.43 billion worth of loans.

In addition to the Chinese assistance, Pakistan is expecting an inflow of $1 billion via an ADB-supported loan by June 26, along with $415 million in additional external financing.

Facing nearly $20 billion in external debt repayments next fiscal year—including $13 billion in bilateral obligations—Pakistan’s reliance on strategic allies and multilateral support remains crucial as it attempts to close a $5 billion financing gap highlighted by the IMF.