Ishaq Dar says China has rolled over $2.4bn loan for two years

Finance Minister Ishaq Dar said on Thursday that China has rolled over a $2.4 billion loan to Islamabad for a period of two years, a boost to the country’s economy as it tries to build its foreign reserves after clinching a deal with the International Monetary Fund (IMF).

“Chinese Exim bank rolled over principal amounts totalling $2.4bn which are due in [the] next two fiscal years,” he said in a post on social platform X, formerly Twitter.

“Pakistan will make interest payments only over the next two years,” Dar said, meaning the waiver is only for the principal loan amount.

A source at Pakistan’s finance ministry told Reuters that over $600 million of the loan was maturing this fiscal year, and that Islamabad has already received a confirmation of the rollover.

“In principle, China and Pakistan have close cooperation in economic and financial sectors, and we will continue to advance cooperation with Pakistan to support the country in achieving stability and development,” Chinese Foreign Ministry spokesperson Mao Ning said.

The development comes a little over a week after Prime Minister Shehbaz Sharif announced that China had rolled over a $600 million loan to Pakistan, helping shore up the country’s foreign exchange reserves.

This was in addition to over $5bn in loans that longtime ally China had rolled over for Pakistan in the last three months, according to the premier, helping Pakistan avert a default as negotiations to secure the IMF bailout dragged on.

Beijing has pledged over $65bn in building infrastructure in Pakistan as part of a Belt and Road Initiative (BRI).

Pakistan secured a last-gasp $3bn IMF bailout on June 30, which later disbursed an initial upfront instalment of about $1.2bn.

This was followed by a further $2bn of financial support from Saudi Arabia and $1bn from the UAE, shoring up the central bank’s reserves, which had dropped to a critical level of barely enough to pay for a month of controlled imports.

The central bank said last week that foreign exchange reserves almost doubled, rising $4.2bn to $8.7bn during the week ending July 14.

The next two reviews of the IMF deal will pass through political uncertainty ahead of general elections due later this year that will be followed by a government transition.

The IMF team this month met the leadership of all political parties, including former prime minister Imran Khan, to seek a continuation of its bailout objectives irrespective of who comes to power.

A joint session of the country’s parliament on Wednesday passed legislation to enable a caretaker administration which will take over after the government of PM Shehbaz retires next month to take policy decisions on bilateral and multilateral agreements, the government said in a statement.