ISLAMABAD: To ease Pakistan’s financial woes, the Chinese government has pledged to award $3.7 billion in trade loans by the end of June.
According to government sources, the loans will be disbursed in Chinese currency rather than US dollars to reduce Pakistan’s dependence on the dollar. The decision is part of Beijing’s policy to wean its economic partnerships off the US currency. According to a private TV channel, the assurances were given during meetings held to refinance loans due between March and June 2025. Pakistan has already repaid the Industrial and Commercial Bank of China’s $1.3 billion loan in three instalments, which will be refinanced in Chinese currency in the coming days.
Moreover, China’s three major banks — China Development Bank, Bank of China, and ICBC — are ready to refinance a $2.1 billion (RMB 15 billion) syndicated loan maturing in June. Officials say the loan will be repaid three days ahead of schedule to allow for timely refinancing. According to government sources, the loan term is being extended by three years, but discussions are ongoing on the interest rate. China has allowed Pakistan to choose between a fixed or floating rate, but it will not be linked to the Shanghai Interbank Offered Rate (SHIBOR).
Pakistan’s foreign exchange reserves have reached $11.4 billion after receiving $1 billion from the IMF this month, and the reserves could reach $12.7 billion after the refinancing of Chinese loans. Under the IMF program, Pakistan has pledged to take the reserves to $14 billion by the end of the fiscal year. According to analysts, this assistance from China will not only lead to financial stability for Pakistan but also reflect China’s strategic support as a friendly country.
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