Ishaq Dar, the finance minister, said that the Industrial and Commercial Bank of China Ltd 1398.HK authorized a rollover of a $1.3 billion loan for cash-strapped Pakistan on Friday. This will support Pakistan’s dwindling foreign exchange reserves.
Three installments will be used to pay for the building. The Pakistani central bank has already gotten the first one, worth $500 million, according to a tweet from Dar. “It will increase forex reserves,” he said.
The money is crucial for the South Asian economy, which is experiencing a balance of payments crisis as its central bank’s foreign exchange reserves have shrunk to levels barely able to cover three weeks of imports, according to Dar, who claimed that Pakistan has recently paid the money back to the ICBC.
China has already loaned Pakistan $700 million to assist increase its foreign exchange reserves.
According to Dar, Pakistan is effectively borrowing back the $2 billion it has given to Beijing in debt repayments for previously approved loans.
He claimed that in order to close its funding gap this fiscal year, which concludes in June, Pakistan would require $5 billion in outside funding.
Only after Islamabad enters into an agreement with the International Monetary Fund (IMF), which the minister said should be completed by next week, will Pakistan receive more outside funding.
Since early last month, the lender has been in talks with Pakistan to resolve its ninth review. If the agreement is accepted by its board, it will release a $1 billion tranche of the $6.5 billion bailout that was agreed upon in 2019.