China rolls over $2bn loan to Pakistan

China Extends Pakistan’s $2 Billion Loan Repayment by One Year

ISLAMABAD: China has granted Pakistan a one-year extension on the repayment of a $2 billion loan, the finance ministry confirmed on Saturday.

Originally due on March 24, the loan’s repayment deadline has now been pushed back, offering Pakistan much-needed financial relief amid ongoing economic challenges, including pressure on foreign exchange reserves.

Pakistan’s external debt is primarily owed to three major sources: multilateral and bilateral creditors, as well as international bonds. Among bilateral lenders, China remains the largest creditor in terms of total external debt and liabilities.

Meanwhile, Pakistan is in negotiations with the International Monetary Fund (IMF) for a fresh loan tranche. A team from the Washington-based lender is currently in Islamabad for discussions.

Last summer, Pakistan secured a $7 billion Extended Fund Facility (EFF) to navigate its economic crisis. The program has been instrumental in stabilizing the economy, and the government asserts that the country is on track for long-term recovery.

Finance Minister Muhammad Aurangzeb stated that Pakistan is "well-positioned" for the first review of its IMF bailout program. The country built credibility with the IMF by successfully completing a nine-month short-term program last year—an achievement in contrast to previous loan arrangements that either stalled or ended prematurely due to unmet conditions.

Additionally, the government is negotiating a Rs1.25 trillion ($4.47 billion) loan with commercial banks to address the mounting debt in the energy sector. According to Power Minister Awais Leghari, resolving this sector’s debt is a key priority under the ongoing IMF program.

“The loan will be repaid over a period of five to seven years,” Leghari told Reuters, noting that the term sheets are yet to be finalized.