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Overview

CDB provides $700 million rollover loan to SBP to shore up Pakistan’s foreign exchange reserves in February 2023 (Linked to Record ID#90968)

Commitments (Constant USD, 2023)$700,000,000
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
Feb 24, 2023
Start (actual)
Feb 24, 2023
End (planned)
Feb 24, 2026
First repayment (originally scheduled)
Feb 23, 2026
Last repayment (originally scheduled)
Feb 23, 2026

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

CDB provides $700 million rollover loan to SBP to shore up Pakistan’s foreign exchange reserves in February 2023

Grace period•3 yearsGrant element•8.2076%Interest rate (t₀)•6.54%Interest type•Variable Interest 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 overnight 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 2% to average SOFR in February 2023 (4.54%). 4.54% is based on the average of daily SOFR rates throughout the month of February 2023. 2. 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.’ See https://na.gov.pk/uploads/documents/questions/642d26d720755_869.pdf 3. June 30, 2023 marked the cessation of the USD LIBOR panel. SOFR then became the dominant interest rate benchmark for USD-denominated borrowings. 4. The Government of Pakistan's loan identification number for the $700 million CDB borrowing in 2023 is CDB18022023. See https://ead.gov.pk/SiteImage/Misc/files/2023/Disbursement%20Report%20March2023.pdf