China Agrees to Extend $2 Billion Loan Term for Pakistan

Islamabad, In a significant development for Pakistan's economy, China has agreed to extend the term of a $2 billion loan under the current conditions, providing Pakistan with crucial financial relief. This agreement comes at a time when Pakistan is navigating through fiscal challenges, seeking to stabilize its economy.

According to Zameen.Com, the extension of the loan term is awaiting formal confirmation from Pakistan's Finance Ministry, following China's informal nod towards postponing the repayment schedule. This move is expected to ease the financial strain on Pakistan by deferring the due date for a substantial portion of its debt obligations to China.

The loan, which originally carried an interest rate proposal higher than the current 7.1%, based on the 6-month Secured Overnight Financing Rate (SOFR) plus 1.715%, was the subject of negotiations between the two countries. Caretaker Prime Minister Anwar Haq Kakar had formally requested a one-year extension on the repayment of this loan in a letter to Chinese Prime Minister Li Keqiang in January, highlighting the importance of the loan for Pakistan's financial stability.

This extension pertains to $2 billion out of the $4 billion in deposits that Pakistan received from China, with the maturity date initially set for March 23, 2024. The decision to extend the loan term is a critical measure to provide Pakistan with the necessary fiscal breathing space to manage its economic challenges effectively.