China's Strategic Loan Aid: Bolstering Pakistan's Economy

In a strategic move to boost Pakistan's foreign exchange reserves, China has committed to refinancing USD 3.7 billion in loans, now denominated in Chinese currency, before the end of June. According to sources within Pakistan's government, this significant financial commitment comes amid China's drive to decouple its economic dealings from the US dollar.

The recent discussions highlighted that Pakistan returned a USD 1.3 billion loan to the Industrial and Commercial Bank of China (ICBC) in three installments earlier this year. As the new agreement solidifies, it's expected that the ICBC will reissue the loan in Chinese currency. While the interest rate details are yet to be finalized, this refinancing remains critical for maintaining Pakistan's economic stability.

This move is part of a broader strategy by China to detach from the US currency and provide a fiscal lifeline to Pakistan at a time when foreign loans amounting to USD 6.2 billion, primarily from China, shape the country's economic landscape. With USD 2.1 billion of these loans set to mature soon, timely refinancing remains pivotal for Pakistan's financial health.

(With inputs from agencies.)