China to Extend $3.7 Billion Financial Assistance to Pakistan Next Month

ISLAMABAD: In a move aimed at supporting Pakistan’s economic stability, China is expected to re-lend approximately $3.7 billion in June.

The assistance, comprising both refinancing and new disbursements, will be largely provided in Chinese yuan (RMB), as Beijing continues shifting away from dollar-denominated lending.

Senior officials confirmed that the Industrial and Commercial Bank of China (ICBC) will roll over a previously repaid $1.3 billion loan in RMB. This loan, originally issued with a floating interest rate of around 7.5%, was paid off by Pakistan between March and April 2024.

Additionally, a $2.1 billion syndicated loan, equivalent to RMB 15 billion, from three Chinese banks is due to mature in June. The lenders include:

• China Development Bank (RMB 9 billion)
• Bank of China (RMB 3 billion)
• ICBC (RMB 3 billion)

Pakistan intends to repay this loan shortly before its maturity and anticipates receiving refinancing in RMB.

Assurances for Future Financial Support

During high-level meetings, Chinese authorities assured Pakistan that they would refinance all loans maturing between March and June 2025. The decision to opt out of US dollar-based lending comes directly from Beijing.

Following a $1 billion disbursement from the IMF, Pakistan’s foreign exchange reserves rose to $11.4 billion in May. However, the Finance Ministry projects that the country will need over $25 billion in external financing for the upcoming fiscal year.

The anticipated external financing will include:

• $12 billion in rollovers from friendly nations, including China, Saudi Arabia, and the UAE
• $4.6 billion in project financing
• $3.2 billion in refinancing of Chinese commercial loans
• $1 billion in new commercial loans from China
• $2 billion in deferred oil payments
• $2 billion from the IMF

Project financing is expected from organizations such as the Asian Development Bank (ADB) and other global financial institutions. The Economic Affairs Division will oversee around $20 billion of this financing, while the Finance Ministry and State Bank will manage rollovers and IMF disbursements.