Faced with declining foreign exchange reserves, Pakistan to borrow $1 billion from Chinese bank as a commercial loan

Islamabad: Pakistan is in talks with a Chinese financial institution to obtain $1 billion as a foreign commercial loan, a media report said on Tuesday.

The report in the Express Tribune said that amid declining foreign exchange reserves, the Pakistan government was in the process of scrutinising the loan term sheets, and the agreement between the two nations was expected to be reached in March.

Pakistan has already obtained $1 billion as a foreign commercial loan from the Industrial and Commercial Bank of China (ICBC) in the last three months.

During the last fiscal year, the Pakistan government had borrowed $2.3 billion from three Chinese financial institutions, according to the Finance Ministry publication.

In addition to the borrowing, Pakistan was also expecting to receive $200 million from a Chinese bank immediately to support foreign currency reserves, the daily reported, citing sources.

The report said that the Pakistan government had shifted its focus towards easy but relatively expensive sources of financing.

The decision to get $1 billion was taken after the government, in February, called, off the $1-billion Eurobond. The government was ready to float the bond but reversed the decision after financial advisers informed it that the 10-year bond may cost it 7.3 percent, the sources told the daily.