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Overview

China’s SAFE provides $500 million deposit loan to shore up Pakistan’s foreign exchange reserves on June 29, 2023

Commitments (Constant USD, 2023)$500,000,000
Excluding rollover amounts$0
Commitment Year•2023Country of Activity•PakistanDirect Recipient Country of Incorporation•PakistanSector•General Budget SupportFlow Type•Loan

Status

Project lifecycle

Implementation

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Jun 29, 2023
First repayment (originally scheduled)
Jun 28, 2024
Last repayment (originally scheduled)
Jun 28, 2024

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownership

Funding agencies

Government Agencies

  • China State Administration of Foreign Exchange (SAFE)

Receiving agencies

Government Agencies

  • Government of Pakistan

Implementing agencies

Government Agencies

  • Government of Pakistan

Loan description

China’s SAFE provides $500 million deposit loan to shore up Pakistan’s foreign exchange reserves on June 29, 2023

Grace period•1 yearsGrant element•3.1811%Interest rate (t₀)•6.34588%Interest type•Variable Interest RateMaturity•1 years

Narrative

Full Description

Project narrative

On June 29, 2019, 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 (as captured via Record ID#92088). The loan carried the following terms: a 1-year maturity (final maturity date: June 29, 2020), a 1-year grace period, and an interest rate of 12-month LIBOR plus a 1% margin. SAFE made a $500 million deposit (loan disbursement) in the State Bank of Pakistan on June 29, 2019. Then, on June 29, 2020, the $500 million SAFE deposit loan from 2019 was repaid and reissued (i.e. 'rolled over') with a maturity date of June 29, 2021 (as captured via Record ID#97809). One year later, on June 29, 2021, the $500 million SAFE deposit loan from 2020 was repaid and reissued (i.e. 'rolled over') with a maturity date of June 29, 2022 (as captured via Record ID#97810). Then, on June 29, 2022, the $500 million SAFE deposit loan from 2021 was repaid and reissued (i.e. 'rolled over') with a maturity date of June 29, 2023 (as captured via Record ID#97804). The Government of Pakistan announced in early June 2023 that it intended to repay and rollover the loan on June 29, 2023. Then, on June 29, 2023, the $500 SAFE deposit loan from 2022 was repaid and reissued (i.e. 'rolled over) with a maturity date of June 29, 2024 (as captured via Record ID#102318).

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.