China agrees to reschedule $2 billion debt

US dollar

ISLAMABAD: China has agreed to reschedule over $2 billion publicly guaranteed debt of Pakistan for a period of two years, providing a major relief to the government that is in the process of rebuilding foreign exchange reserves through fresh loans and rolling over maturing debt.

The Economic Coordination Committee (ECC) of the Cabinet on Thursday approved the revised terms of the agreement reached between Islamabad and Beijing, according to senior Pakistani officials quoted by The Express Tribune Friday.

Pakistan has built two nuclear power plants in Karachi that have a combined generation capacity of 2,117 megawatts. The total cost of the plants is $9.5 billion, including the $6.5 billion financing from Beijing. The loan was extended by the Export-Import (Exim) Bank of China.

Of $2 billion, over $625 million was maturing in this fiscal year that will now be paused. The $6.5 billion is a publicly guaranteed debt and over $2 billion repayments were maturing in two years that China has agreed to make a pause on, according to the senior officials.

China has time and again helped Pakistan meet its debt obligations through the provision of new loans and rollover of the existing debt. China prematurely refinanced its $1.3 billion commercial loans in June, which helped Pakistan avoided a default on its international debt obligations during the period when the International Monetary Fund programme was stalled.

The Ministry of Finance did not officially make a statement about the ECC’s stamp of endorsement to the revised agreement with China.

Read more: Pakistan eyes China help for debt rescheduling 

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