ISLAMABAD— China has assured Pakistan that it will re-lend $3.7 billion in commercial loans, denominated in the Chinese currency renminbi (RMB), by the end of June. The move will help Pakistan maintain its foreign exchange reserves in double digits, which is crucial for meeting the International Monetary Fund’s (IMF) targets.
In recent months, Pakistan has repaid $1.3 billion in loans to the Industrial and Commercial Bank of China (ICBC) in three installments. According to government sources, ICBC is expected to re-lend the amount in Chinese currency, which will increase Pakistan’s foreign exchange reserves.
In addition, a joint loan of $2.1 billion is also maturing in June, which is between the China Development Bank, the Bank of China, and ICBC. Pakistan plans to repay the loan early to stabilize its reserves by the end of the fiscal year.
The loans will be denominated in Chinese yuan, part of China’s broader strategy to wean its economy off the U.S. dollar. China’s financial support is crucial to keeping Pakistan’s economy stable, especially as it seeks to increase its foreign exchange reserves to $14 billion under an IMF program.
China’s financial support is a temporary boon for Pakistan, but experts say Pakistan needs to move toward long-term economic reforms, diversified financial resources, and transparent governance to achieve fiscal independence.
