China is set to re-lend approximately $3.7 billion to Pakistan next month, helping Islamabad keep its foreign exchange reserves above $10 billion, according to sources.
This financial assistance, which includes both refinancing of existing loans and new disbursements, will primarily be provided in Chinese yuan (RMB), signaling Beijing’s shift away from dollar-based lending practices.
Insiders confirmed that the Industrial and Commercial Bank of China (ICBC) will roll over a previously repaid $1.3 billion loan in RMB. The original loan carried a floating interest rate of around 7.5% and was repaid by Pakistan between March and April 2024. Additionally, a syndicated loan of $2.1 billion (equivalent to RMB 15 billion), involving China Development Bank (RMB 9 billion), Bank of China (RMB 3 billion), and ICBC (RMB 3 billion), is scheduled to mature in June. Pakistan plans to repay this amount days before maturity, with expectations that refinancing will also be offered in RMB.
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Chinese officials have assured Pakistan that all loans maturing between March and June 2025 will be refinanced, with the use of yuan instead of US dollars being a deliberate strategic move by Beijing.
Pakistan’s foreign exchange reserves rose to $11.4 billion in May after receiving $1 billion from the IMF. However, the Finance Ministry projects that over $25 billion in external financing will be needed for the upcoming fiscal year.
This figure includes $12 billion in loan rollovers from allies such as China, Saudi Arabia, and the UAE; $4.6 billion in project financing; $3.2 billion in Chinese loan refinancing; $1 billion in new Chinese commercial loans; $2 billion through deferred oil payments; and another $2 billion from the IMF.
Project financing is expected to come from global financial institutions like the Asian Development Bank (ADB). Around $20 billion of this financial flow will be managed by Pakistan’s Economic Affairs Division, while the central bank and Finance Ministry will oversee IMF-related and rollover arrangements.
