Pakistan Repays $1 Billion Loan to Chinese Bank

Islamabad, Mar 28 (PTI) Pakistan has repaid a USD 1 billion commercial loan to the Industrial and Commercial Bank of China (ICBC) with the expectation of securing its refinancing soon, according to a media report.

This repayment has temporarily pulled down the country's already thin foreign exchange reserves to a six-month low of USD 10.6 billion, the report added.

The loan was originally provided by ICBC two years ago at a floating interest rate of approximately 7.5 per cent, reported The Express Tribune. The repayment was made in two equal tranches this month, according to Pakistani authorities.

Additionally, another loan tranche of USD 300 million by the ICBC will mature by mid-April, which the Pakistan government plans to retire in the same month, sources said.

Due to the second USD 500 million repayment in the third week of March, the central bank's reserves dropped to USD 10.6 billion, marking the lowest level in six months.

The first USD 500 million tranche had been paid in early March and the central bank covered the gap by purchasing dollars from the market and receiving some foreign inflows.

The central bank governor previously stated that USD 9 billion had been purchased from the market in 2024 to build foreign exchange reserves. Without these purchases, reserves would have been barely USD 2 billion, even with support from the International Monetary Fund (IMF) program.

The Finance Ministry was hopeful that ICBC would refinance the facility. They said that discussions have already begun but have not yet reached the point of interest rate determination.

Pakistan is heavily dependent on China for financial support, with Beijing consistently rolling over USD 4 billion in cash deposits, USD 6.5 billion in commercial loans and a USD 4.3 billion trade financing facility.

Furthermore, an additional USD 2.7 billion in Chinese commercial loans is set to mature between April and June this year.

A USD 2.1 billion syndicate financing loan by three Chinese commercial banks is maturing in June. Separately, the Bank of China's USD 300 million loan will also mature in the same month, which Pakistan has to get refinanced to retain the reserves at their critical minimum levels.