KARACHI: China is working on a request by Pakistan to roll over a $2-billion loan that matured last week, a top finance ministry official told Reuters.

The rollover is critical for the South Asian nation, as its foreign exchange reserves have dipped to just four weeks worth of imports at a time when it is locked in talks with the International Monetary Fund (IMF) to secure bailout funds.

“It is a work in progress,” the official said in a text message on Wednesday, on condition of anonymity. “Formal documentation is underway.”

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A formal announcement will be made, the source added, but gave no further details. The loan matured on March 23.

As Pakistan struggles to avert a default on its obligations, the only help so far has come from longtime ally Beijing.

The IMF funding is critical for Pakistan to unlock other external financing avenues, and the two have been negotiating since early February to resume $1.1 billion in funding held since November, part of the bailout agreed in 2019.

One of the lender’s last remaining conditions for release of the tranche is securing an assurance on external financing to fund Pakistan’s balance of payments.

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The development comes as Pakistan reels from one of its worst economic crises in history. The South Asian country has been faced with a barrage of woes with a perceived default risk and downgrade by international ratings agencies reflecting the state of the economy that has also had to bear major political turmoil and frequent change in key leadership.

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The IMF programme’s revival has been deemed crucial to stabilise the economy that has been hit by a severe dollar shortage in recent months with reserves held by the central bank treading at critically low levels.

Last week, the IMF said it needs to ensure financing assurances are in place in order to take “the next step with Pakistan”.

“Timely financial assistance from external partners will be critical to support the authorities’ policy efforts and ensure the successful completion of the review with Pakistan,” the IMF’s Director of Strategic Communications stated in a press briefing on Friday.

“Ensuring that there is sufficient financing to support the authorities is the paramount priority. A Staff Level Agreement (SLA) will follow once the few remaining points are closed,” she said.