Islamabad: A loan of USD 2.3 billion from a Chinese group of banks to Pakistan is anticipated in the next “few days” to help the country deal with its declining cash reserves.
Notably, Pakistan and a group of Chinese banks had earlier agreed on a lending facility of USD 2.3 billion. Pakistan’s finance minister, Miftah Ismail, stated on Wednesday that the loan agreement’s financial inflow is anticipated to begin within a few days.
The Chinese consortium of banks has today signed the RMB 15 billion (~$2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday. Inflow is expected within a couple of days. We thank the Chinese government for facilitating this transaction.
— Miftah Ismail (@MiftahIsmail) June 22, 2022
Grateful to President Xi Jinping, Foreign Minister Wang Yi and the people of China 🇨🇳. Chinese consortium of banks has today signed the RMB 15 billion loan facility agreement, the people of Pakistan are grateful for the continued support of our all weather friends. pic.twitter.com/ZMjocIOBcV
— BilawalBhuttoZardari (@BBhuttoZardari) June 22, 2022
According to the media outlet, Pakistan is in a severe financial crisis as a result of claims that Pakistan and the International Monetary Fund (IMF) had reached an agreement.
Ismail claimed that following talks between Prime Minister Shehbaz Sharif and Prime Minister Li Keqiang and a visit by Foreign Minister Bilawal Bhutto-Zardari, the Chinese side had not only agreed to roll over the money but had also done so at a lower interest rate of 1.5 percent plus Shanghai Interbank Offered Rate (Shibor) as opposed to the previous 2.5 percent plus Shibor.
Ismail did not go into greater detail about the arrangement with the consortium in Wednesday’s release, though.
In addition, there have been allegations that Pakistan is blindly following Sri Lanka’s example, which will cause it to become trapped in the Chinese debt trap. These reports coincide with the loan arrangement between China and Pakistan. According to the Italian journal Osservatorio Globalizzazione, China’s latest demand for repayment of USD 55.6 million for the Lahore Orange Line Project by November 2023 caused further harm to Pakistan’s already ailing economy.
As a result of the repayment of external debt, the State Bank of Pakistan’s foreign exchange reserves at the end of March decreased significantly by USD 2.915 billion. As far as its relations with China are concerned, Pakistan has a gloomy economic future.