The rescheduling request, which specifically targets loans obtained from the Chinese Export-Import (Exim) Bank, seeks a two-year extension in repayment
By our correspondent
ISLAMABAD: Pakistan has formally requested China to reschedule another $3.4 billion of official and guaranteed debt, maturing between October 2024 and September 2027, which is crucial for addressing Islamabad’s $5 billion external financing gap identified by the International Monetary Fund (IMF) during the approval of the $7 billion Extended Fund Facility (EFF) in September.
The rescheduling request, which specifically targets loans obtained from the Chinese Export-Import (Exim) Bank, seeks a two-year extension in repayment. The loan is comprised of both official debt and debt guaranteed by Pakistan’s State-Owned Enterprises (SOEs), with the latter making up about a third of the total amount. The rescheduling request is part of Pakistan’s ongoing efforts to manage its external debt and fulfill the IMF’s conditions.
Islamabad has been hoping that China, which has often quietly supported Pakistan in the past, will extend its assistance once again to help meet the financial requirements. This would follow a similar request made by Pakistan in July 2023, when China agreed to roll over $2.4 billion in debt due between July 2023 and June 2025. Pakistan has only been required to make interest payments on this rescheduled amount, helping alleviate some pressure on its fiscal position.
The immediate priority for Pakistan is to reschedule a $750 million debt due within this fiscal year, as this would allow the IMF to certify that the $7 billion EFF is fully funded and that Pakistan’s debt remains sustainable. Failure to reschedule this debt could exacerbate the $5 billion financing gap that the IMF flagged, with approximately $2.5 billion of that gap falling within the current fiscal year. However, some promised borrowings are reportedly falling behind schedule, further complicating Pakistan’s financial situation.
The IMF has already expressed concern over Pakistan’s failure to meet certain conditions for the July-September period, prompting an unscheduled IMF mission to visit Islamabad. Although the formal review for the release of the next $1.1 billion tranche is not expected before March 2025, this unscheduled mission has raised doubts about the handling of the $7 billion agreement, with critics suggesting it was poorly negotiated.
China’s support has been vital for Pakistan’s financial stability, with the country relying on Beijing for continuous rollover of loans, including $4 billion in cash deposits, $6.5 billion in commercial loans, and a $4.3 billion trade financing facility.
