China has agreed to reschedule over $2 billion publicly guaranteed debt of Pakistan for two years, providing significant relief to the government by rebuilding foreign exchange reserves through fresh loans and rolling over maturing debt.
The Economic Coordination Committee (ECC) of the Cabinet on Thursday approved the revised terms of the agreement reached between Islamabad and Beijing, according to senior Pakistani officials.
Finance Minister Ishaq Dar chaired the meeting.
Pakistan has built two nuclear power plants in Karachi with a combined generation capacity of 2,117 megawatts. The total cost of the plants is $9.5 billion, including the $6.5 billion financing from China. The loan was extended by the Export-Import (Exim) Bank of China.
Of $2 billion, over $625 million was maturing in this fiscal year that will now be paused. The $6.5 billion is a publicly guaranteed debt, and over $2 billion repayments were growing in two years that China has agreed to make a pause on, according to the senior officials.
China has repeatedly helped Pakistan meet its debt obligations by providing new loans and rollover the existing debt. China prematurely refinanced its $1.3 billion commercial loans in June, which helped Pakistan avoid defaulting on its international debt obligations when the International Monetary Fund programme was stalled.
After signing the new IMF programme, Pakistan’s gross official foreign exchange reserves have bounced back to $8.7 billion – up from the critically low level of $4.5 billion before the IMF deal.