BEIJING: Amidst worsening external debt servicing indicators, the federal cabinet has decided to obtain $1 billion loan from a Chinese bank to retire a liability of almost similar amount – including Eurobond debt incurred during the rule of Gen (retd) Pervez Musharraf. The decision to obtain yet another major loan from a Chinese institution comes at a time when the debt servicing-related payments to China have grown almost three times during the past one year.
In its second last meeting, the federal cabinet had approved signing a foreign commercial facility agreement of $1 billion with the China Development Bank, according to official documents. It will be the second time in the current fiscal year that the China Development Bank would extend the credit to help Pakistan meet its foreign debt-related obligations. Earlier, the China Development Bank gave $700 million at an interest rate equivalent to 4.44% for a period of three years, showed the documents. The fresh loan will be utilised for balance of payments and budgetary support, according to the Ministry of Finance. While addressing the launching ceremony of the Economic Survey of Pakistan last week, Finance Minister Ishaq Dar had said that in June Pakistan would be retiring two foreign loans of $1.05 billion – including $750 million Eurobond. Without disclosing the source of borrowing, Dar said the government had made arrangements for returning both the loans next month. In 2007, the Musharraf government had issued 10-year bonds at a 6.875% interest rate, maturing this week.
