In a major relief, Pakistan has received a loan worth $1 billion from China, even as the IMF loan is shrouded in doubts. The critical loan will alleviate the foreign reserves of the cash-strapped Pakistani economy.
On Friday night, the State Bank of Pakistan (SBP) confirmed receiving the amount from China without sharing any other details about it. “This is to inform you that USD 1 billion has been received from China,” said the Pakistani Central Bank in a message.
China Has Actually Returned The Loan Money
The Chinese loan would boost foreign reserves of Pakistan to about $4 billion.
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Ishaq Dar, the finance minister, had earlier stated that Pakistan had given China $1 billion last Monday in return for a debt of $1.3 billion and that it was anticipated the money would be returned.
Dar claimed that Pakistan and China had reached an agreement regarding the repayment and refinancing of the $1.3 billion in commercial loans that were about to mature as well as the $1 billion State Administration of Foreign Exchange (SAFE) deposit. Dar was speaking to the National Assembly Standing Committee on Finance.
China waived the prepayment penalty that is generally applied when a borrower chooses to repay ahead of time, and Pakistan made the payment 18 days ahead of time.
A diplomat source shortly after Dar’s announcement disclosed that China had released the $1 billion on Friday. The $300 million debt would be handled in the same way, the person added. Due to Pakistan’s inability to pay its debts, China is refinancing these older loans.
According to the Pakistani Finance Minister,China was eager to lend money and was aware of Pakistan’s challenging financial situation.
Worsening Pakistani Economy
The Pakistani economy is in the doldrums with record inflation and rising interest rates. The economic growth has descended to record levels of low.
Pakistan’s National Accounts Committee reported gross domestic product (GDP) provisionally expanded by 0.29 per cent for the fiscal year ending June 30. The economy had taken a drastic turn since the Covid and floods that devastated the nation, earlier this year.
Moreover, the political crisis and growing instability in the nation is a major deterrent to resolvement of the economic woes.
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