Pakistan on Wednesday signed a 15 billion yuan ($2.3 billion) loan agreement with a Chinese consortium of banks to help the country’s cash-strapped economy following the depletion of foreign exchange reserves. and the depreciation of its local currency.
Pakistani Finance Minister Miftah Ismail said in a tweet that “Chinese Consortium of Banks today (Wednesday) signed the RMB 15 billion ($2.3 billion) loan facility agreement after that it was signed by the Pakistani side yesterday (Tuesday).
Thanking the Chinese government for “facilitating this transaction”, Ismail said “the influx was expected within a few days”.
Foreign Minister Bilawal Bhutto-Zardari also expressed his gratitude to Chinese leaders. “The people of Pakistan are grateful for the continued support of our all-time friends,” he said.
The loan deal with Chinese banks will boost crisis-hit Pakistan’s reserves and allow Islamabad to make import payments while also providing support for the rupee.
The Pakistani rupee has lost more than 34% since the start of the outgoing fiscal year 2021-22.
The latest development comes as massive relief for economic policymakers after foreign exchange reserves held by the State Bank of Pakistan (SBP) fell below $9 billion as of June 10, with the level remaining below six weeks of import coverage.
The China deal also came on a day when reports emerged of an agreement between Pakistan and the International Monetary Fund (IMF) to reinstate the global lender’s stalled $6 billion aid package.
It will also support Pakistan’s dwindling cash reserves, which stand at $8.99 billion, according to central bank data, the Dawn newspaper reported.
The agreement with the IMF should open doors to funding from other international sources.
Reviving the facility will provide immediate access to $1 billion, which Pakistan badly needs to bolster its dwindling foreign exchange reserves.
The finance minister had warned last week that Pakistan’s economy could find itself in a position similar to that of Sri Lanka if tough decisions were not made.
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