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Overview

China Development Bank provides $700 million loan in February 2020 to shore up Pakistan's foreign exchange reserves (Linked to Record ID#92272, #96086)

Commitments (Constant USD, 2023)$722,213,675
Commitment Year•2020Country of Activity•PakistanDirect Recipient Country of Incorporation•PakistanSector•General Budget SupportFlow Type•Loan

Status

Project lifecycle

Completion

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Feb 1, 2020
End (planned)
Feb 1, 2023
End (actual)
Feb 1, 2023
First repayment (originally scheduled)
Jan 31, 2023
Last repayment (originally scheduled)
Jan 31, 2023

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

State-owned Policy Banks

  • China Development Bank (CDB)

Receiving agencies

Government Agencies

  • State Bank of Pakistan (SBP)

Implementing agencies

Government Agencies

  • State Bank of Pakistan (SBP)

Loan description

China Development Bank provides $700 million loan in February 2020 to shore up Pakistan's foreign exchange reserves

Grace period•3 yearsGrant element•12.7798%Interest rate (t₀)•4.74525%Interest type•Variable Interest RateLoan tenor•6-month rateMaturity•3 years

Narrative

Full Description

Project narrative

In February 2020, China Development Bank (CDB) and the State Bank of Pakistan (SBP) signed a $700 million facility (loan) agreement to shore up Pakistan’s foreign exchange reserves (as captured via Record ID#90968). The borrowing terms included a 3-year maturity, a 3-year grace period, and an interest rate of 6-month LIBOR plus a 3% margin. This loan was repaid at maturity (February 2023). In February 2023, Pakistan’s Federal Minister for Finance and Revenue, Senator Mohammad Ishaq Dar, announced that the State Bank of Pakistan (SBP) had secured a $700 million (rollover) facility agreement with China Development Bank (CDB) to shore up Pakistan’s foreign exchange reserves (as captured via Record ID#96086). The borrowing terms of the loan are as follows: a 3-year maturity and an interest rate of SOFR plus a 2% margin. The loan disbursed in full on February 24, 2023. Under a staff-level agreement with the IMF that was slated for signature on February 28, 2023, the SBP was required to build its foreign exchange reserves to a minimum of $10 billion to cover the country’s import bill for two months.

Staff comments

1. AidData has estimated the all-in interest rate by adding 3% to average 6-month LIBOR in February 2020 (1.679%). 2. The precise loan commitment date is unknown. This issue requires further investigation. For the time being, AidData assumed that the loan contracted in Fiscal Year 2019-2020 was contracted in calendar year 2019, and the commitment date is coded as July 1, 2019. 3. This project is linked to a $1 billion loan provided by CDB in FY 2019-2020. It is unclear whether CDB issued two separate loans (a $1 billion loan and a $700 million loan) or a single $1.7 billion loan in two separate tranches. For the time being, the $700 million contribution is captured via Record ID#90968 while the $1 billion contribution is captured via Record ID#92272.