China Reaffirms Strategic Ties with $3.4 Billion Loan Extension to Pakistan

China has extended $3.4 billion in loans to Pakistan, a move that bolsters the country’s foreign exchange reserves to meet International Monetary Fund (IMF) targets. This financial support includes a $2.1 billion loan, held in Pakistan’s central bank reserves for the past three years, and a refinanced $1.3 billion commercial loan repaid by Pakistan earlier this year. Combined with $1 billion from Middle Eastern commercial banks and $500 million from multilateral lenders, Pakistan’s reserves have reached $14 billion, aligning with IMF requirements for the fiscal year ending June 30, 2025.

This loan rollover reflects China’s ongoing economic partnership with Pakistan, providing a vital buffer as the nation navigates fiscal challenges under a $7 billion IMF bailout program. The State Bank of Pakistan reported a recent decline in reserves to $9.06 billion for the week ending June 20, 2025, highlighting the importance of these inflows. Posts on X have noted positive market sentiment, with the Pakistan Stock Exchange (PSX) gaining momentum, as 334 of 484 listed companies recorded gains following the announcement.

Pakistan’s total debt to China, including cash deposits and trade financing, stands at approximately $26 billion. The rescheduling of these loans offers temporary relief, though concerns persist about the long-term sustainability of Pakistan’s debt obligations. This development underscores the deep economic ties between Islamabad and Beijing, particularly through initiatives like the China-Pakistan Economic Corridor (CPEC), which continues to shape Pakistan’s infrastructure and financial landscape.

Published in SouthAsianDesk, June 30th, 2025

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