China asked to fast-track $1.3b refinancing

Pakistan repaid $2.2b in external debt in July weighing on foreign exchange reserves

ISLAMABAD:

Pakistan has formally requested China to expedite the refinancing of $1.3 billion in commercial loans, seeking early completion of the process to support its foreign exchange reserves, according to Ministry of Finance sources.

According to the sources, Pakistan made external payments of $2.2 billion in July, which included the repayment of $1.3 billion in Chinese commercial loans. Officials said discussions with Chinese authorities are ongoing to complete the refinancing process at the earliest possible time, with the rules, terms and conditions expected to be finalised soon. Once the process is concluded, the funds are likely to be disbursed within the current month.

Sources added that the government expects the inflow to provide much-needed support to the country's foreign exchange reserves. They reiterated that of the $2.2 billion paid in July, $1.3 billion constituted repayment of Chinese commercial debt. Pakistan has repaid around $1.4 billion to China in total, which is expected to be refinanced within the next few weeks.

It is pertinent to note that State Bank of Pakistan Governor Jameel Ahmad, while speaking to the media outside Parliament House after attending a meeting of the Senate Standing Committee on Finance, had also stated that $2.2 billion in external debt was repaid in July. He said the total external debt servicing requirement had declined from $26.5 billion to $21.5 billion, with $3.5 billion to be paid in interest alone.

He added that the government's strategy to ease repayment pressure and bolster foreign exchange reserves is ongoing. Ahmad further noted that Pakistan would require a rollover of $12 billion from Saudi Arabia and China during the current year to manage its external obligations effectively. While Pakistan has repaid $1.4 billion in commercial loans to China, Chinese banks have yet to refinance the amount, though it is expected to be returned to Islamabad after a delay of a few weeks. Sources said the government has now formally requested China to complete the refinancing process.