KARACHI: Finally, the government succeeded to get rollover the Chinese loan of $2.3 billion and the State Bank of Pakistan (SBP) received the amount in its account on Friday.

Finance Minister Miftah Ismail tweeted he was pleased to announce that Chinese Consortium loan of RMB15bn (roughly $2.3bn) has been credited into SBP account, increasing foreign exchange reserves.

With the inflows of $2.3bn Chinese loan the total SBP reserves entered double digit to touch $10.5bn.

Earlier on April 1, the rupee plunged to a historic low of Rs183.70 against US dollar in the interbank market after the SBP reported a massive outflow of $2.9bn. The SBP announced its foreign exchange reserves dropped to $12.047bn during the week ending on March 25 due to a major repayment of Chinese loans, while the rest was regular debt servicing.

The SBP said the decline was due to repayment of external debt, including a major syndicated loan facility from China, while the rollover of this syndicated facility was being processed and was expected shortly. The bank expected that the amount would come back in the reserves after completion of the rollover process in April.

The then foreign minister Shah Mehmood Qureshi, who was in China, said his Chinese counterpart had assured him that Beijing had agreed in principle for granting rollover of $2.3bn in commercial loans to Pakistan.

China stopped rollover of the promised loan after the ouster of the government in second week of April. The PML-N government then made all-out efforts to get the loan released after the foreign exchange reserves of the SBP had nosedived to reach $8.23bn.

The alarming situation was aggravated by the continuous depreciation of rupee against US dollar. The rupee depreciated by 24pc during the current financial year FY22.

Since the country badly needed the inflows of dollars, the news about an agreement with the Chinese loan suddenly on Thursday appreciated rupee by Rs4.70 in a single session, which was the biggest recovery of rupee against dollar in a single day.

The SBP reported it received $2.3bn Chinese loan and also reported that the rupee lost 25 paisa to Rs207.48 against the dollar.

Since August 2021 the foreign exchange reserves has been declining and fell to less than half of the peak $20bn. With the inclusion of $2.3bn, the SBP reserves reached double digit though the currency experts said it was a temporary relief as the trade gap was too big with the current account deficit at $13.8bn during the first 10 months of FY22.

Published in Dawn, June 25th, 2022