China has agreed to extend the repayment deadline for a $2 billion loan to Pakistan that was set to mature on March 23rd, according to finance ministry officials.
Initially, China wanted to raise interest rates on the loan but has now decided to rollover the amount, giving Pakistan more time to repay. Confirmation from the Chinese embassy in Islamabad is awaited.
Last month, Pakistan’s interim Prime Minister Anwaarul Haq Kakar had requested China to extend its loans amid economic hardship. Due to currency devaluation, Pakistan paid a steep 118% more interest totaling Rs26.6 billion to China, Saudi Arabia and UAE last fiscal year.
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With gross foreign reserves of only $8 billion presently, Pakistan has been borrowing from regional allies during its balance of payments crisis. But its mounting repayment obligations have become challenging to fulfill.
The loan rollover indicates China’s willingness to temporarily ease pressures on its ally facing grave economic challenges. But analysts say Pakistan urgently needs to secure a revival IMF program and implement reforms to achieve lasting stability.
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