According to Finance Minister Ishaq Dar, the Industrial and Commercial Bank of China Ltd. approved a rollover of a $1.3 billion loan for cash-strapped Pakistan on Friday. This will boost Pakistan’s dwindling foreign exchange reserves.
The loan will be paid back in three payments. Dar announced in a tweet that the first one, worth $500 million, has been received by the State Bank of Pakistan. “That will improve foreign exchange reserves,” he stated.
Formalities completed & Chinese Bank, ICBC approved rollover of US$1.3 billion facility which has been repaid by Pakistan to ICBC in recent months. Facility will be disbursed in 3 instalments, first one of US$500 million has been received by SBP. It will increase forex reserves!
— Ishaq Dar (@MIshaqDar50) March 3, 2023
Dar said, the money Pakistan has returned to ICBC in recent months is crucial for the country’s economy, which is reeling from a balance of payments crisis and whose foreign exchange reserves central bank fell just enough to last three weeks.
Earlier in the day, Dar told a press conference that Pakistan is waiting for funding from ICBC. Pakistan had previously received a $700 million loan from China to boost its foreign exchange reserves. Dar said Pakistan had repaid $2 billion of its debt to China on a previously agreed loan. Pakistan will need $5 billion in foreign loans this fiscal year to fill its financing gap, he said.
Fahad Rauf, Head of Research at Ismail Iqbal Securities, believes Pakistan may attract foreign investment in rupee-denominated sovereign debt securities such as T-bills and Pakistan Investment Bonds (PIBs) after the central bank raised its policy rate by 300 basis points to a record high-of 20% on Thursday and the rupee reached an all-time low.
“Hot money inflows will assist build up foreign currency reserves and provide support to the rupee versus the greenback in the near term,” Rauf added.