According to a Ministry of Finance top official China will grant $2.1 billion to Pakistan next week. This will push the gross official foreign currency reserves of the country to double-digits after a year.
All procedural formalities have been completed by the Ministry of Finance with the Chinese counterpart for a RMB 15 billion equivalent to $2.1 billion facility. This was stated by the Advisor to Ministry of Finance Dr Khaqan Najeeb. On Monday, 25th March the funds will be deposited in the State Bank of Pakistan (SBP).
Three banks of China will give this commercial loan. Most probably these banks are Industrial and Commercial Bank of China (ICBC), Bank of China (BoC) and China Development Bank (CDB). In the past the Chinese commercial loans were attached with London-Interbank Offered Rates. Now the interest rates have been linked with Shanghai Interbank Offered Rates.
According to Dr Khaqan the interest rates were highly “competitive” but he did not reveal the rates. Earlier China gave commercial loans in 4 to 5% range.
According to the advisor this loan will help improve the foreign reserve exchange and make certain of the balance of payments stability. For the last four months, Pakistan has waited to secure this loan. Finally, Finance Minister Asad Umar revealed last week that agreements were done with two Chinese banks.
The PTI government has been striving to get loans from the friendly nations to overcome default on global debt obligations.