China has agreed, in principle, to reschedule approximately $1.8 billion of Pakistan’s official debt for two years—a key move to support Islamabad’s current IMF programme, government officials told Reuters. While this figure represents only half of Pakistan’s initial request last year, it remains critical for maintaining macroeconomic stability amid dwindling foreign exchange reserves.
Pakistan had sought relief on three types of Chinese financing: concessional loans, preferential buyer credit, and credit from the Export-Import Bank of China. Beijing has agreed to defer payments only on the government’s concessional and preferential buyer credits—totaling $1.8 billion—by July 2025. However, buyer’s credit and COVID-era loans are excluded from relief, according to officials.
The debt rescheduling follows urgent pressure on Pakistan’s foreign reserves, which briefly fell below $10 billion after a significant commercial repayment to China. Authorities expect a rebound to nearly $14 billion within a week, contingent on the refinancing of these loans by Beijing alongside support from other sources, such as an upcoming $1 billion ADB-backed facility and an additional $415 million line.
Finance Minister Muhammad Aurangzeb assured that reserves will reach $13.9 billion by the end of the fiscal year (June 30), provided that China proceeds with its refinancing plans. The IMF-supported $7 billion package for Pakistan highlighted a $5 billion external financing gap, largely to be plugged through bilateral debt relief and commercial borrowing agreements.
China’s decision marks the second deferral it has extended in two years. In July 2023, Islamabad secured a two-year rescheduling of 31 Exim Bank loans, worth $2.43 billion, under then–Finance Minister Ishaq Dar—a relief he later announced as Deputy Prime Minister.
To qualify for the new debt restructuring agreement, China has proposed repayment terms from July 2025 through June 2027, aligning with the IMF programme’s review period. Islamabad reportedly objected to Beijing’s suggestion to convert repayment currency from USD to RMB, citing legal and technical concerns.
Looking ahead, nearly $20 billion in external public debt is set to mature in the next fiscal year, including $13 billion in bilateral obligations. Pakistani officials say that bilateral partners have committed to rollover arrangements, essential for meeting IMF-compliant reserves thresholds and averting default risk.
China’s conditional agreement to defer $1.8 billion of debt eases immediate pressure on Pakistan’s reserve levels and bolsters the country’s commitments under its IMF package. However, excluding key credit lines and the looming $20 billion debt due next year mean Islamabad must negotiate further relief or secure fresh financing to stabilize its economy.
