China renews a $2 billion loan for one year

China has transferred a $2 billion loan in safe deposits for Pakistan’s cash-strapped economy despite declining foreign exchange reserves.

Earlier, Pakistan’s damaged currency seemed resilient as it closed at 229 versus the dollar on Wednesday, up 11.50 rupees from Tuesday’s closing of 240. According to reports, some exchange companies were reportedly selling dollars for as little as Rs218 in a panic.

“China has rolled over three SAFE deposits. The first deposit of $500 million was due on June 27, 2022, the second $500 million matured on June 29, 2022 and the third $1 billion was due on July 23, 2022. China’s State Administration Foreign Exchange (SAFE) deposits of $2 billion have been rolled over for one year,” a top official of the Finance Division confirmed.

China has so far extended a total of a $4.3 billion loan, including $2.3 billion in commercial loans and now $2 billion in SAFE deposits, allowing Islamabad to bridge the external financial gap with a huge sum of $35.9 billion for the current fiscal year.

Once sufficient finance assurances are provided, the IMF has connected the possibility of having a planned tentative Executive Board meeting by the end of August 2022.

However, Pakistani authorities are still waiting for confirmation from friendly nations, particularly Qatar, the UAE, and the Kingdom of Saudi Arabia (KSA), to close the $4 billion financing gap that the IMF identified as being necessary to meet the $35.9 billion in gross external financing requirements for the current fiscal year.