China extends a $2 billion loan once more.

ISLAMABAD : An important development is that China has once again given Pakistan another year to repay the $2 billion debt. The initial date of the debt’s maturity was March 24.

The extension will assist Pakistan bolster its foreign exchange reserves, Ministry of Finance sources told The Express Tribune, confirming the development. They said that Pakistan’s economic stability and revival depend heavily on China, a longtime ally, continuing to provide economic help.

“China rolled over a $2 billion loan to Pakistan,” Khurram Schehzad, the finance minister’s assistant, also texted Reuters on Saturday saying.

Pakistan is working to strengthen its finances after securing a $7 billion International Monetary Fund (IMF) bailout in September 2024. The first installment of the loan is currently under review, and if successful, Pakistan will receive an additional $1 billion.

Securing external financing has previously been a key condition for the IMF to approve bail-out deals for the cash-strapped nation. Pakistan needs to repay over $22 billion in external debt in fiscal year 2025, including nearly $13 billion in bilateral deposits, Fitch said.

China had rolled over the loan for one year in February last year on existing terms after initially seeking a hike in price. China has been a key economic partner for Pakistan, providing financial assistance and investments, particularly under the China-Pakistan Economic Corridor (CPEC) initiative.

The extension comes while Pakistan is still dealing with economic issues, such as a balance of payments problem and continuing negotiations to obtain more funding from foreign lenders.

As the government concentrates on stabilizing the economy, officials said the loan delay will lessen the strain on rapid repayment. Discussions for the first review of the $7 billion Extended Fund Facility (EFF) obtained last year were formally started by Pakistan and the IMF earlier this week.

The IMF mission, headed by Nathan Porter, met with Finance Minister Muhammad Aurangzeb in Islamabad, according to the Ministry of Finance. The nation’s overall economic status was the main topic of discussion.

As negotiations for the most recent economic review continue in Islamabad, Pakistan reassured the international lender at the meeting of its dedication to economic reforms and budgetary restraint.

The IMF group was informed by Finance Minister Aurangzeb on the macroeconomic conditions, tax collection, and structural reform developments in the nation. He reaffirmed Pakistan’s commitment to fulfilling the terms of its $7 billion credit deal.

The nation has been exposed to a number of hazards as a result of the previous governments’ failure to attract non-debt-creating inflows. The rate at which exports are increasing is insufficient to pay for imports. Foreign direct investment is still sluggish and dry.

Extending the period of an existing debt rather than paying it back in full when it’s due is known as rolling over. This is often accomplished by renegotiating the loan’s conditions with the lender, so refinancing it so that the borrower may keep using the money while postponing complete repayment.