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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)
| Funder | Industrial and Commercial Bank of China (ICBC) |
|---|---|
| Recipient Organization | State Bank of Pakistan (SBP) |
| Country | Pakistan |
| Start Date | Mar 01, 2023 |
| End Date | Feb 15, 2027 |
| Duration | 1,447 days |
| Number of Grantees | 1 |
| Roles | Recipient |
| Data Source | AidData Chinese Aid |
| Grant ID | 96258 |
Grant Description
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 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 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 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).
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.
Staff Comments
1. There is some evidence that three separate loans with identical borrowing terms were provided by ICBC: a $500 million loan in March 2023, another $500 million loan in March 2023, and a $300 million loan in April 2023. This issue warrants further investigation. See https://www.brecorder.com/news/amp/403371922. One official source (https://v.icbc.com.cn/userfiles/resources/icbc/haiwai/karachi/download/2024/threequartersreportforperiodendedseptember302024.pdf) identifies the borrower as Pakistan's Ministry of Finance. This issue warrants further investigation.
Sources & References
- Pakistan Seals $2 Billion Loan From China Amid IMF Delay
- Formalities completed & Chinese Bank
- ICBC approved rollover of US$1.3 billion facility which has been repaid by Pakistan to ICBC in recent months
- ICBC approves rollover of $1.3bn facility
- China approves $1.3 bln loan rollover for Pakistan -finance minister
- Ishaq Dar on Twitter
- Pakistan receives another $300 million from China amid IMF bailout delay
- Pakistan to receive $300mn from ICBC today: Dar
- State Bank’s forex reserves rise by $394million as fresh Chinese loan flows in
- ICBC re-routes $1 billion loan
- China assures Pakistan of continued support
- Pakistan Economic Survey 22-23
- Pakistan Seals $2 Billion Loan From China Amid IMF Delay
- Pakistan Economic Survey 2022-2023
- NATIONAL ASSEMBLY SECRETARIAT (6th Group, 51st Session) “QUESTIONS FOR ORAL ANSWERS AND THEIR REPLIES” to be asked at a sitting of the National Assembly to be held on Wednesday, the 5th April, 2023
- State Bank's forex reserves rise by $394million as fresh Chinese loan flows in
- China approves $1.3bn loan rollover for Pakistan
- Pakistan receives $500m from Chinese bank
- ICBC Pakistan Branches Q3 Financial Statements Sept 30, 2024
- NFC award: govt official says IMF has attached no conditions Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.
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State Bank of Pakistan (SBP)
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