Miftah announces $2.3bn Chinese loan agreement, inflows expected ‘within days’

On Wednesday, Finance Minister Miftah Ismail announced that a Chinese consortium of banks and Pakistan has signed a $2.3 billion (15 billion renminbi) lending facility arrangement, with cash inflow anticipated within “a few days.”

The minister announced on Twitter that the Pakistani side signed the deal yesterday. Ismail said, “We thank the Chinese government for supporting this transaction.”

Foreign Minister Bilawal Bhutto-Zardari also thanked the Chinese leadership.

“The people of Pakistan are appreciative of our all-weather allies’ unwavering assistance,” he remarked.

The finance minister announced earlier this month that the terms and circumstances for refinancing the deposit by Chinese banks had been agreed upon.

He stated that the loan would “boost our foreign exchange reserves.”

Ismail stated at a press conference on June 2 that China had revoked the loan on March 25 and imposed stringent restrictions under which Pakistan could not use the funds.

He further said that after a visit by Foreign Minister Bilawal Bhutto-Zardari and subsequent discussions between Prime Minister Shehbaz Sharif and Prime Minister Li Keqiang, the Chinese side had not only agreed to roll over the amount but also done so at a lower interest rate of 1.5pc plus Shanghai Interbank Offered Rate (Shibor) as opposed to the previous 2.5pc plus Shibor.

Ismail did not comment on the deal with the consortium in today’s release.

The development follows the news that Pakistan had agreed with the International Monetary Fund (IMF).

According to data from the central bank, it will also increase Pakistan’s cash reserves, which are currently $8.99 billion.

The minister previously stated that an agreement with the IMF would pave the way for receiving loans from other international organizations. In May, he said that even China had conditioned any financing on renewing the IMF’s program.