Bank of China contributes to RMB 15 billion loan to shore up Pakistan’s foreign exchange reserves in March 2019

Project narrative

On March 19, 2019, China Development Bank (CDB), Bank of China (BoC), and the Industrial and Commercial Bank of China (ICBC) signed an RMB 15 billion ($2.1837 billion) facility (loan) agreement with the State Bank of Pakistan (SBP) to shore up the country’s foreign exchange reserves. The estimated contributions from CDB, ICBC, and BoC are captured via Record ID#57695, Record ID#98785, and Record ID#98786, respectively. The loan carried the following borrowing terms: a 3-year maturity (final maturity date: March 25, 2022) and an interest rate of 6-month SHIBOR plus a 2.5% margin. The loan fully disbursed, and when it reached maturity in March 2022, it was fully repaid. Then, on June 22, 2022, CDB, BoC, and ICBC and the State Bank of Pakistan signed an RMB 15 billion ($2,240,310,000) syndicated rollover facility (loan) agreement to shore up the country’s foreign exchange reserves. The estimated contributions from CDB, BoC, and ICBC are captured via Record ID#96215, Record ID#105360, and Record ID#105361, respectively. The loan carried the following borrowing terms: a 3-year maturity, a 3-year grace period, and an interest rate of 6-month SHIBOR plus a 1.5% margin. The loan had fully disbursed by June 24, 2022. Prior to the signing of the June 2022 loan agreement, CDB told the State Bank of Pakistan that (a) future loan proceeds 'could not be used' (i.e. the proceeds from a rollover facility could only be used to bolster gross reserves and serve as 'window dressing') due to weakening of the external sector position of Pakistan, and (b) it expected the Government of Pakistan to remain in good standing with the International Monetary Fund. However, when the June 2022 loan agreement was finalized, CDB authorized the borrower to freely use the proceeds of the loan (including for external debt service and foreign reserve accumulation).