Narrative
Full Description
Project narrative
On June 27, 2020, China’s State Administration of Foreign Exchange (SAFE) provided a $500 million loan to State Bank of Pakistan in order to shore up the country’s foreign exchange reserves. The loan carried the following terms: a 1-year maturity (final maturity date: June 27, 2021), a 1-year grace period, and an interest rate of 12-month LIBOR plus a 1% margin. On June 27, 2021, the $500 million SAFE deposit loan from 2020 was repaid and reissued (i.e. 'rolled over') with a maturity date of June 27, 2022. One year later, on June 27, 2022, the $500 million SAFE deposit loan from 2021 was repaid and reissued (i.e. 'rolled over') with a maturity date of June 27, 2023. The Government of Pakistan announced in early June 2023 that it intended to repay and rollover the loan on June 27, 2023. Then, on June 27, 2023, the $500 SAFE deposit loan from 2022 was repaid and reissued (i.e. 'rolled over) with a maturity date of June 27, 2024.
Staff comments
1. According to an April 4, 2023 report from the National Assembly of Pakistan, ‘[a]ll of Chinese commercial bank maturities during FY23 will be rolled over. Chinese authorities have assured the rollover of SAFE deposits, refinancing of bank loans and increase in the SWAP line from RMB 30 billion to RMB 40 billion. Government has recently received US$ 700 mn from CDB and further inflows are in pipeline from ICBC.’ 2. June 30, 2023 marked the cessation of the USD LIBOR panel. SOFR then became the dominant interest rate benchmark for USD-denominated borrowings. 3. The precise interest rate that applies to this borrowing is unknown. For the time being, AidData estimates the all-in interest rate by adding a 1% margin to SOFR in June 2023 (5.06%). This issue warrants further investigation.