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China has agreed to a partial debt rescheduling for Pakistan worth $1.8 billion, which is nearly half of what Islamabad initially requested last year. Despite falling short of expectations, this move is essential for Pakistan to meet its foreign exchange reserve requirements under the ongoing International Monetary Fund (IMF) programme.
Government officials said the rescheduling involves concessional loans and preferential buyer credit provided by the Export-Import (Exim) Bank of China. However, Beijing has declined to include the buyer’s credit in the package. The restructured loans are expected to be finalized by next month and cover various infrastructure projects, excluding commercial debt from Chinese banks.
The development follows a dip in Pakistan’s foreign exchange reserves, which temporarily slipped below $10 billion after bullet repayments to China last week. Officials anticipate that reserves will rise to nearly $14 billion once Beijing refinances the repaid loans. Finance Minister Muhammad Aurangzeb has stated that reserves will exceed $14 billion by the close of the fiscal year on Monday.
Pakistan Had Initially Sought Broader Loan Relief
Pakistan had originally requested China to reschedule $3.4 billion in loans from Exim Bank to help fill a $5 billion external financing gap flagged by the IMF. Deputy Prime Minister Ishaq Dar raised the issue during a visit to Beijing in February, requesting relief for repayments due from October 2024 through September 2027. However, Chinese authorities excluded COVID-era loans and instead proposed rescheduling debt maturing between September 2025 and September 2027—a suggestion Islamabad did not accept.
China has also asked Pakistan to consider repaying future loans in Chinese yuan rather than U.S. dollars. This marks the second time in two years that the Exim Bank has supported debt rescheduling for Pakistan, having extended a two-year relief on $2.43 billion in 2023.
To bridge its financing needs, Pakistan is also expecting a $1 billion ADB-backed loan by June 26, alongside another $415 million inflow. These funds, along with China’s refinancing of $3.7 billion in commercial debt, will help meet the IMF’s target of $13.9 billion in reserves by the end of FY2024-25.
As nearly $20 billion in external debt matures next fiscal year—including $13 billion in bilateral deposits—Pakistan is relying heavily on Beijing to fulfill its IMF commitments.
