Loan of $2.3bn from China credited into SBP account, says Miftah Ismail

The roughly $2.3-billion loan from China has been credited into the State Bank of Pakistan's (SBP) account, which would help prop up foreign exchange reserves, said Finance Minister Miftah Ismail on Friday.

“I am pleased to announce that Chinese consortium loan of RMB 15 billion (roughly $2.3 billion) has been credited into SBP account today, increasing our foreign exchange reserves,” said Miftah in a tweet.

Later, the SBP also confirmed it has received the Chinese consortium loan of RMB15bn.

On Wednesday, Miftah had announced that a consortium of Chinese banks had signed the $2.3-billion loan facility with Pakistan. The development came as the South Asian economy battles a widening current account deficit and dwindling foreign exchange reserves.

“The Chinese consortium of banks has signed the RMB 15 billion (~$2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday,” said Miftah then.

The finance minister said that the inflow is expected within a couple of days. “We thank the Chinese government for facilitating this transaction,” he added.

On Thursday, foreign exchange reserves held by the SBP decreased a massive $748 million on a weekly basis, falling to a critical $8.24 billion amid expectations that the recently-signed agreement with Chinese banks would help boost the level.

The SBP said total liquid foreign reserves held by the country stood at $14.21 billion as of Jun 17, 2022 with net foreign reserves held by commercial banks clocking in at $5.97 billion.

Falling reserves have taken a toll on Pakistan's economy with the rupee staying under pressure against the US dollar for the past few months. On Friday, it closed at Rs207.48 against the dollar, a far cry from the start of the year when it was at 176.51.