Pakistan seeks faster China refinancing of $1.3 billion loan

Pakistan has formally asked China to expedite the refinancing of a USD 1.3 billion commercial loan, with the funds expected to be disbursed later this month once the terms and conditions are finalized, according to sources familiar with the matter.

Pakistani and Chinese authorities are working to complete the refinancing process as quickly as possible, the sources said, as Islamabad seeks timely support for its foreign exchange reserves following heavy external debt repayments in July.

The refinancing request comes after Pakistan repaid USD 2.2 billion in external debt during July, including the USD 1.3 billion Chinese commercial loan, the sources said.

Officials at the Finance Ministry expect the refinancing to help offset part of the recent decline in foreign exchange reserves and provide additional liquidity as Pakistan continues to meet its external debt obligations.

Separately, the government expects the State Bank of Pakistan to purchase more than USD 7 billion from the interbank foreign exchange market during the current fiscal year, according to the sources.

The dollars purchased through the market are expected to be used to meet external debt-servicing requirements and strengthen the country’s foreign exchange reserves, they said.

Pakistan’s total liquid foreign exchange reserves stood at USD 22.442 billion as of July 24, according to the State Bank of Pakistan.

Of the total, the central bank held USD 17.030 billion, while commercial banks held USD 5.412 billion.

The SBP’s reserves fell by USD 229 million during the week ended July 24, declining to USD 17.030 billion from the previous week due to external debt repayments, the central bank said.

The anticipated refinancing from China is expected to provide relief to Pakistan’s reserves and strengthen external liquidity as the country manages its debt-servicing obligations while seeking to maintain adequate reserve buffers.