ISLAMABAD: In a significant relief for Pakistan’s fragile economy, China has agreed to reschedule $1.8 billion in loans, providing much-needed breathing space as Islamabad works to meet its foreign financing needs under the International Monetary Fund (IMF) programme.
The agreement, finalized with the Export-Import (Exim) Bank of China, falls short of Pakistan’s original request to restructure $3.4 billion in debt. Talks reportedly hit a snag over the inclusion of buyer’s credit loans, which were ultimately excluded from the final deal.
Under the new arrangement, repayments on the $1.8 billion will be deferred over a two-year window — from July 2025 to June 2027. However, Pakistan will continue to make interest payments during this period.
Government officials and analysts see the rescheduling as a crucial move to avert a near-term default and stabilize dwindling foreign exchange reserves. The country’s reserves had recently dipped below $10 billion after it returned a $2.1 billion loan to China. Officials now expect reserves to cross $14 billion by the end of June 2025, bolstered by the loan rescheduling, fresh inflows from the Asian Development Bank, and additional refinancing from friendly countries.
Finance Minister Muhammad Aurangzeb had already projected that reserves would top $14 billion by the close of FY 2024-25 — a target that now appears within reach, thanks in part to this lifeline from Beijing.
The debt being rescheduled primarily includes concessional and preferential loans extended for development and infrastructure projects. These are distinct from buyer’s credit loans — commercial instruments used to finance imports — which China declined to restructure in this round of talks.
The rescheduling is a part of Pakistan’s broader efforts to fulfill the IMF’s requirements for external financing. The IMF has estimated that Islamabad needs to bridge a $5 billion external financing gap during the three-year programme. China’s support is proving critical in this regard.
Looking ahead, Pakistan faces a daunting external debt repayment bill of nearly $20 billion in the upcoming fiscal year. Around $13 billion of this is expected to be rolled over by bilateral partners — including China, Saudi Arabia, and the UAE — in line with commitments made under the IMF programme.
While the deal doesn’t address all of Pakistan’s financial concerns, it provides vital short-term relief. As the country prepares for a challenging fiscal year ahead, continued cooperation from international partners and strict adherence to economic reforms remain key to restoring long-term stability.
