Pakistan eyes $1.3bn Chinese loan refinance to bolster FX reserves

August 04, 2026 (MLN): Pakistan has formally approached China to fast-track the refinancing of a $1.3bn commercial loan, with the funds expected to be released later this month after both sides finalize the remaining terms and conditions, sources familiar with the matter said.

Pakistani and Chinese authorities are actively engaged in discussions to complete the refinancing process at the earliest.

Officials at the Ministry of Finance expect the inflow to provide timely support to the country's foreign exchange reserves following sizeable external debt repayments.

The refinancing request comes after Pakistan repaid $2.2bn in external debt during July, including the settlement of the $1.3bn Chinese commercial loan.

In addition, the government expects the State Bank of Pakistan (SBP) to purchase more than $7bn from the interbank foreign exchange market during the current fiscal year.

The acquired dollars are planned to be utilized for external debt servicing while also helping strengthen the country's foreign exchange reserves, the sources added.

Meanwhile, the SBP reported that Pakistan's total liquid foreign exchange reserves stood at $22.442bn as of July 24, 2026. Of the total reserves, the central bank held $17.030bn, while commercial banks accounted for $5.412bn.

The central bank's reserves declined by $229m during the week ended July 24, primarily due to external debt repayments, decreasing from the previous week's level to $17.030bn, according to the SBP.

The expected refinancing from China is likely to partly reverse the recent decline in the central bank's reserves and provide additional external liquidity support as Pakistan continues to meet its external debt obligations while maintaining an adequate reserve position.

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