China’s SAFE provides $500 million deposit loan to shore up Pakistan's foreign exchange reserves in January 2014 (Linked to Project ID#73341)

On January 23, 2009, China’s State Administration of Foreign Exchange (SAFE) provided a $500 million deposit loan to State Bank of Pakistan (SBP) in order to shore up the country’s foreign exchange reserves (and address the country’s weak current account situation). The loan, which was backed by a sovereign guarantee (from Pakistan's Ministry of Finance), carried the following borrowing terms: an interest rate of 6-month LIBOR pus a 1% margin, a 4-year maturity, and a 4-year grace period. The loan was repayable semi-annually and it was scheduled to mature on January 23, 2013. On January 23, 2013, the $500 million SAFE deposit loan from 2009 was repaid and reissued (i.e. 'rolled over') with a maturity date of January 23, 2014. Then, on January 23, 2014, the $500 million SAFE deposit loan from 2013 was repaid and reissued (i.e. 'rolled over') with a maturity date of January 23, 2015. One year later, on January 23, 2015, the $500 million SAFE deposit loan from 2014 was repaid and reissued (i.e. 'rolled over') with a maturity date of January 23, 2016. Then, on January 23, 2016, the $500 million SAFE deposit loan from 2015 was repaid and reissued (i.e. 'rolled over') with a maturity date of January 23, 2017. Rather than rollover for yet another year, the Government of Pakistan decided to repay the loan in 2017 due to the country’s strong macroeconomic performance and stable foreign exchange reserves position. Pakistan’s Finance Minister directed the SBP to make payment of $500 million to China’s State Administration of Foreign Exchange (SAFE) on January 23, 2017. The then-Prime Minister Muhammad Nawaz Sharif expressed his deep appreciation to the Chinese Government for the critical support it provided through the SAFE deposit, which had stabilized the country’s current account since 2009.

Additional details

1. AidData assumes that the same variable interest rate that applied to the January 2009 loan also applied to the 2014 rollover loan. AidData has estimated the all-in interest rate by adding 1% to average 6-month LIBOR in January 2014 (0.338%). 2. Until 2018, all SAFE loans were managed by the State Bank of Pakistan (SBP). However, during the 2018-2019 fiscal year, the loans were reclassified and are now under the aegis of the Economic Affairs Division (EAD).”

Number of official sources

6

Number of total sources

10