 "China rolls over $2 billion loan to Pakistan, extends repayment period by 1 year")
China has rolled over a $2 billion loan to a cash-strapped Pakistan on existing terms, the country’s Finance Minister Shamshad Akhtar said Thursday.
According to a report by Geo News, the loan, which was due in March, has been extended for another year.
Beijing and Islamabad reportedly reached an understanding to extend the repayment of the loan that is due to mature on March 23, Pakistan’s The Express Tribune quoted officials from the finance ministry saying.
Pakistan’s cash-strapped economy is struggling to stabilise from a financial crisis and secured a $3 billion standby arrangement from the International Monetary Fund last summer.
Sources say that China had initially demanded an increase in interest rates on the $2 billion debt. Islamabad is currently paying a 7.1 per cent interest rate based on the six-month Secured Overnight Finance Rate (SOFR) plus 1.715 per cent.
Meanwhile, officials said that China, an all-weather ally of Pakistan, had informally communicated its decision to further extend the repayment period and the finance ministry was waiting for a formal response, the report said.
Interim Prime Minister Anwaarul Haq Kakar last month formally requested the Chinese government to roll over the maturing loans, according to the officials.
In the last fiscal year, Pakistan had to shell out Pakistani Rs 26.6 billion to pay interest rates to China, Saudi Arabia and the United Arab Emirates on the $9 billion deposits that these three nations placed with the State Bank of Pakistan.
Impact Shorts
More ShortsIn the preceding year, the country had paid Pakistani Rs 12.2 billion which within a year jumped by 118 per cent.
Authorities say that a major factor behind the 118 per cent increase in the interest cost was the currency devaluation in the previous fiscal year.
With inputs from agencies
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