© Reuters. FILE PHOTO-Pakistan’s Finance Minister Ishaq Dar attends a news conference in Islamabad, Pakistan, June 2, 2016. REUTERS/Faisal Mahmood/File Photo
By Asif Shahzad
ISLAMABAD (Reuters) -Pakistan Finance Minister Ishaq Dar said on Thursday that China has rolled over a $2.4 billion loan to Islamabad for a period of two years, a boost to its foreign reserves on the back of an IMF deal which helped it avert a default.
“Chinese Exim bank rolled over principal amounts totalling $2.4 bln which are due in next 2 fiscal years,” he said in a post on messaging platform X, formerly known as Twitter.
“Pakistan will make interest payments only over the next two years,” Dar said, meaning the wavier is only for the principal loan amount.
A source at Pakistan’s finance ministry told Reuters that over $600 million of the loan was maturing this fiscal year, and that Islamabad has already received a confirmation of the roll over.
Longtime ally Beijing, which has pledged over $65 billion in building infrastructure in Pakistan as part of a Belt and Road Initiative (BRI), in recent months either rolled over or granted new loans worth around $5 billion to Islamabad as negotiations with the International Monetary Fund (IMF) dragged out over eight months, according to Prime Minister Shehbaz Sharif.
A disbursement of around $1.2 billion from the lender and bilateral inflows from friendly countries including Saudi Arabia and United Arab Emirates after the deal have shored up the Pakistani central bank’s reserves, which had dropped to a critical level of barely enough to pay for a month of controlled imports.
Dar has said the country’s economy was already on a path to stabilisation.
The last-gasp IMF pact – which came only with tough conditions over fiscal discipline – helped Pakistan avert a sovereign default on the back of an acute balance of payment crisis that has fuelled an all-time high inflation rate in the nation of 220 million people.
The next two reviews of the IMF deal will pass through political uncertainty ahead of general elections due later this year that will be followed with a government transition.
The IMF team this month met the leadership of all political parties, including former Prime Minister Imran Khan, to seek a continuation of its bailout objectives irrespective of who comes to power.
A joint session of the country’s parliament on Wednesday passed legislation to enable a caretaker administration which will take over after the government of Prime Minister Shehbaz Sharif retires next month to take policy decisions on bilateral and multilateral agreements, the government said in a statement.