China has agreed to extend the repayment period of a $2 billion loan to Pakistan on its existing terms.
According to the Express Tribune, an agreement has been reached to postpone the repayment of the $2 billion loan, which was due to mature on March 23, 2024. China has informally communicated its decision to extend the amortization further, and the Ministry of Finance is awaiting a formal response before issuing a circular.
It’s worth noting that China had initially requested a higher interest rate on the loan amount, compared to the existing rate of 7.1 percent based on the 6M Secured Overnight Finance Rate (SOFR) plus 1.715 percent.
In January, Caretaker Prime Minister Anwar Haq Kakar wrote a letter to Chinese Prime Minister Li Keqiang requesting a one-year extension in the repayment of the $2 billion loan.
Out of the total $4 billion deposits received from China, $2 billion is set to mature on March 23, 2024. Pakistan had sought a one-year extension for the repayment. This decision to extend the loan maturity will provide Pakistan with essential fiscal flexibility.
Additionally, last month, the United Arab Emirates also extended the maturity of two deposits worth $1 billion each for another year.
