ICBC provides $1.3 billion rollover loan to SBP to shore up Pakistan’s foreign exchange reserves in March 2023 (Linked to Record ID#92624, 92625, 92619)

Project narrative

Between October 2020 and February 2021, Industrial and Commercial Bank of China (ICBC) issued three loans worth $1.3 billion to the State Bank of Pakistan (SBP) for the same purpose and with identical borrowing terms. On October 29, 2020, ICBC provided a $500 million loan to the State Bank of Pakistan to shore up the country’s foreign exchange reserves (as captured via Record ID#92625). The loan carried the following borrowing terms: an interest rate of 3-month LIBOR plus a 2.75% margin, a 2-year grace period, and a 2-year maturity. The loan was fully disbursed by March 2021. Then, on January 21, 2021, ICBC provided a $500 million loan to the State Bank of Pakistan to shore up the country’s foreign exchange reserves (as captured via Record ID#92624). The loan carried the following borrowing terms: an interest rate of 3-month LIBOR plus a 2.75% margin, a 2-year grace period, and a 2-year maturity. The loan was fully disbursed by March 2021. On February 22, 2021, ICBC provided a $300 million loan to the State Bank of Pakistan to shore up the country’s foreign exchange reserves (as captured via Record ID#92619). The loan carried the following borrowing terms: an interest rate of 3-month LIBOR plus a 2.75% margin, a 2-year grac period, and a 2-year maturity. The loan was fully disbursed by March 2021. All three ICBC loans (worth $1.3 billion) were repaid by the SBP by March 2023. In March 2023, Pakistan’s Federal Minister for Finance and Revenue, Senator Mohammad Ishaq Dar, also announced that the State Bank of Pakistan had secured a $1.3 billion rollover facility agreement -- known as a foreign currency commercial loan facility agreement -- with the Karachi Branch of ICBC to shore up Pakistan’s foreign exchange reserves (as captured via Record ID#96258). The loan originally carried the following borrowing terms: an interest rate of 3-month LIBOR plus a 2.75% margin, a 2-year grace period, and a 2-year maturity. However, its interest rate was later reset to overnight SOFR plus a 2.95% margin (after the LIBOR-SOFR transition in June 2023). It was scheduled for disbursement in 3 installments. The first installment of $500 million disbursed on March 3, 2023. The second installment of $500 million disbursed on March 17, 2023. The third installment of $300 million disbursed on April 14, 2023. The $500 million disbursement that took place on March 3, 2023 and the $500 million disbursement that took place on March 17, 2023 were treated as foreign currency-denominated domestic debt by Pakistan's Ministry of Finance. Some sources claim that the accounting practice was adopted by the Ministry of Finance to understate its true level of public debt exposure to external creditors. Other sources claim that ICBC had to adopt to route the additional funds through its local (Karachi) branch due to the Government of Pakistan’s poor credit rating, which had made it more difficult to contract new commercial loans from external creditors. 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 reserves to a minimum of $10 billion to cover the country’s import bill for two months. The $1.3 billion rollover loan from March 2023 was repaid in three tranches between March 2025 and April 2025.