The ICBC had given the loan two years ago at floating interest rates, which translated to around 7.5 per cent.
The central bank’s reserves remained around USD 11.4 billion after a USD 1 billion injection by the IMF this month. After the next Chinese refinancing, it may increase to USD 12.7 billion before seeing another dip from the middle of next month, said the sources.
A USD 2.1 billion or 15 billion RMB syndicate financing loan by three Chinese commercial banks is maturing in June.
Pakistan will pay at least three days ahead of the maturity to make sure that the money is given back before the close of the fiscal year. China would give this money in RMB currency, said the sources.
The China Development Bank had given 9 billion RMB, Bank of China 3 billion RMB and ICBC 3 billion RMB. The loan is being extended for a period of three years, said the government sources.
However, the interest rate issue was still undecided. Chinese authorities have given two options to Pakistan. It has proposed that Pakistan should either get the loan at a fixed interest rate or at a floating rate but that would not be based on Shanghai Interbank Offered Rate (Shibor), said the sources.
The timely refinancing of this loan was critical for Pakistan to keep the reserves in the double digits by the end of June. Under the International Monetary Fund (IMF) programme, Pakistan has committed to increase the reserves close to USD 14 billion in this fiscal year.
The Bank of China’s USD 300 million loan will also mature next month, which Pakistan has to get refinanced to retain the reserves at their critical minimum levels. This loan too would be refinanced in Chinese currency, said the sources.
The move to delink loans from the US dollar is not Pakistan specific rather it is part of the overall Chinese policy to decouple its economy from the US currency.
Pakistan remains dependent on Beijing for remaining afloat, the friendly nation that is constantly rolling over the USD 4 billion cash deposits, USD 5.4 billion worth commercial loans and USD 4.3 billion trade financing facility.
