China rolls over $3.4bn in loans

June 29, 2025 (MLN): China has rolled over $3.4 billion in loans to Pakistan, which has pushed the country’s foreign exchange reserves to around $14 billion, well-informed sources told Mettis Global on Sunday.

The support from China includes a $2.1bn deposit that has remained with Pakistan’s central bank for the past three years, now extended for another term, along with the refinancing of a $1.3bn commercial loan that Islamabad had repaid two months ago.

“These inflows bring our reserves broadly in line with IMF targets,” the official noted, saying that the Chinese rollover was secured just before the close of Pakistan’s fiscal year.

In addition to China’s support, Pakistan recently received another $1bn from commercial banks in the Middle East and $500 million through multilateral financing.

Together, these developments are expected to ease immediate external account pressures and help shore up confidence in the country’s ability to meet upcoming debt obligations.

Market expectations had been building for the Chinese rollover, as local newspapers were reporting at the development just days earlier.

The new inflows provide Pakistan with crucial breathing space as it looks to stabilize the economy and strengthen its negotiating hand in upcoming talks with the IMF and other creditors.

Foreign exchange reserves held by the State Bank of Pakistan (SBP) fell by a hefty $2.66bn during the week ended June 20, settling at $9.06bn, according to data released on Thursday.

This marks the largest weekly drop in over three years, surpassing any decline since March 2022, when reserves had shrunk by $2.9bn.

The sharp drop in SBP’s reserves was primarily driven by the government's external debt repayments, particularly the settlement of commercial loans.

However, the central bank noted that during the current week, it has received fresh inflows, including $3.1bn commercial loans for the government and over $500 million from multilateral sources.

“These inflows will be reflected in SBP’s foreign exchange reserves for the week ending June 27, 2025,” the SBP said in its statement.

Earlier in April, while speaking at an event at the Pakistan Stock Exchange (PSX), SBP Governor Jameel Ahmad had revised the central bank’s year-end reserves projection upward to $14bn by June 2025, compared to an earlier forecast of $13 billion.

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