In yet another unusual act, Pakistan's economic hit man has decided to take loan from the friendly country China in order to support the depleting foreign exchange reserves of the country.
Pakistan has decided to borrow $600 million from China to boost its dwindling foreign currency reserves that have depleted by $1.7 billion since expiry of the International Monetary Fund programme.
It is the second time in the last three years that the Pakistan Muslim League-Nawaz government has decided to ask a friendly country to boost its foreign currency reserves.
Earlier, Saudi Arabia had gifted $1.5 billion to Pakistan in two equal tranches in 2014.
The country’s top economic managers on Thursday held a meeting to thrash out details for the Chinese loan, finance ministry sources said. State Bank of Pakistan Governor Ashraf Wathra, Finance Minister Ishaq Dar and Finance Secretary Tariq Bajwa attended the meeting.
The Bank of China will provide the loan on commercial terms, the sources said. They said the amount will be disbursed this month. The loan is expected to be given for a period of three years at an interest rate ranging between 3.1% and 3.2%, said the sources.
With fresh borrowings, the Chinese contribution in Pakistan’s official foreign currency reserves held by the SBP would increase to $1.3 billion, as China Development Bank has already lent $700 million for balance of payment support during the current fiscal year.
The China Development Bank has given the loan for a period of three years.
The $1.3 billion Chinese borrowings are part of $2 billion foreign commercial bank loans that Pakistan has budgeted for current fiscal year 2016-17. In addition to Chinese $1.3 billion borrowings, Pakistan also obtained $200 million from Noor Bank of United Arab Emirates.
The foreign loans would support the reserves besides helping to meet the budget financing needs.