China has agreed in principle to reschedule $1.8 billion in loans to Pakistan, offering a two-year extension on repayments. Although this is only about half the amount Pakistan had initially requested, the move comes as a much-needed relief for Islamabad as it works to meet foreign exchange targets outlined by the International Monetary Fund (IMF).
The rescheduling will likely cover concessional loans and preferential buyer credits extended by China’s Export-Import (Exim) Bank. However, sources confirm that China has declined to include buyer’s credit loans in the arrangement.
This development arrives just as Pakistan’s foreign exchange reserves dipped below $10 billion, following the repayment of $2.1 billion in commercial debt to Chinese institutions. With the refinancing of $3.7 billion in Chinese loans expected before the end of the month, the reserves are projected to rise above $14 billion, aligning with Finance Minister Muhammad Aurangzeb’s forecast.
Pakistan had originally requested a deferral of $3.4 billion worth of Chinese loans, including those due from October 2024 to September 2027. However, Chinese authorities suggested focusing only on loans maturing from July 2025 to June 2027 and excluding buyer’s credit, which was deemed ineligible for restructuring.
One condition reportedly set by China is to convert these rescheduled loans from U.S. dollars to Chinese yuan. This marks the second time in two years that Beijing has rescheduled Pakistani debt; the first instance occurred in July 2023, covering over $2.4 billion in 31 loans.
As Pakistan faces about $20 billion in public external debt repayments next fiscal year—mostly bilateral—this debt relief is a vital step in bridging the IMF-identified external financing gap of $5 billion under the current $7 billion programme.
