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Overview

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

Commitments (Constant USD, 2023)$512,776,590
Excluding rollover amounts$0
Commitment Year•2014Country 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
Jan 23, 2014
Start (actual)
Jan 23, 2014
End (actual)
Jan 23, 2015
First repayment
Jan 23, 2015
Last repayment
Jan 23, 2015

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

  • State Bank of Pakistan (SBP)

Implementing agencies

Government Agencies

  • State Bank of Pakistan (SBP)

Guarantors

Government Agencies

  • Pakistan Ministry of Finance

Loan desecription

China’s SAFE provides $500 million deposit loan to shore up Pakistan's foreign exchange reserves in January 2014

Grace period•1 yearsGrant element•7.6265%Interest rate (t₀)•1.5725%Interest type•Variable Interest RateLoan tenor•12-month rateMaturity•1 years

Narrative

Full Description

Project narrative

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.

Staff comments

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).”