Islamabad (TDI): China has extended the repayment period of Pakistan’s $2 billion loan by one year, the Ministry of Finance confirmed on Saturday.
The loan was originally due for repayment on March 24, but China has agreed to extend the deadline, providing Pakistan with crucial financial relief, according to the ministry.
This extension comes as Pakistan faces economic challenges, including pressure on foreign exchange reserves.
Around 92 percent Pakistan’s external debt is owed by three major sources including multilateral and bilateral creditors as well as through international bonds.
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Among the bilateral creditors, China is on the top keeping in view the total external debt and liabilities.
Meanwhile, Pakistan is seeking a fresh loan tranche from the International Monetary Fund (IMF), with the global lender’s team currently in Islamabad for talks.
Pakistan secured the $7 billion Extended Fund Facility (EFF) last summer to help claw its way out of a financial crisis.
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The program has played a major role in stabilising the country’s economy and the government has said Pakistan is on course for a long-term recovery.
Finance Minister Muhammad Aurangzeb said that Pakistan was “well positioned” for the first review of its $7 billion IMF bailout program.
Islamabad was able to build some trust with the IMF by completing a short-term 9-month program last year.
Previous loan programs in Pakistan ended prematurely or faced delays after the governments at the time faltered on meeting key conditions.
Furthermore, the government is discussing a Rs1.25 trillion ($4.47 billion) loan with commercial banks to reduce its bulging energy sector debt, according to media reports.
Plugging unresolved debt across the sector is a top priority under the current $7 billion IMF bailout, which has helped the country dig its way out of an economic crisis.
“The loan will be repaid over a period of five to seven years,” Power Minister Awais Leghari said, adding that the term sheets are yet to be signed.
