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China Extends $2 Billion Loan to Pakistan, Easing Financial Pressure Amid Economic Challenges

Pakistan's Foreign Reserves Drop, SBP's Dollar Reserves Rise by $27.1 Million

By DTD- On Mar 8, 2025

ISLAMABAD: In a significant move to support Pakistan’s economic stability and recovery efforts, China has agreed to extend the repayment period of a $2 billion loan by another year. The loan, originally due for repayment on March 24, will now be rolled over, providing much-needed relief to Pakistan in the face of mounting financial pressures.

The Ministry of Finance confirmed the extension, highlighting that this decision by China will help Pakistan maintain strong foreign exchange reserves and support its ongoing economic recovery. The rollover comes as Pakistan continues to navigate economic challenges, including external debt repayments and rising import expenses.

Economic Relief Amidst Declining Reserves

This loan extension is particularly important as Pakistan’s total foreign exchange reserves recently saw a decline of $51.9 million, dropping to $15.87 billion. Despite the overall decrease, the State Bank of Pakistan (SBP) reported a positive development, with its dollar reserves increasing by $27.1 million, reaching $11.2 billion.

However, commercial banks have experienced a significant decrease in their dollar deposits. The reserves held by banks fell by $79 million, bringing the total to $4.62 billion. These fluctuations in foreign reserves reflect the ongoing economic challenges Pakistan faces as it works to stabilize its economy.

China-Pakistan Economic Partnership

China has been a vital economic partner for Pakistan, particularly through initiatives like the China-Pakistan Economic Corridor (CPEC), which has involved significant financial and infrastructure investments. This extension of the loan is another example of China’s continued support to Pakistan during a critical time.

As Pakistan continues its efforts to stabilize its economy, this extension provides a crucial cushion against immediate financial pressure, allowing the country more time to manage its foreign obligations and work towards long-term economic recovery.