Cash-strapped Pakistan has received $1 billion from its close ally China to support its critically low foreign reserves amidst the uncertainty to revive a stalled International Monetary Fund loan.

The State Bank of Pakistan (SBP) on Friday night confirmed having received the amount from China without sharing any other details about it. It would add to the reserves which had fallen to almost $3.9 billion in recent weeks.

Earlier, finance minister Ishaq Dar said Pakistan had paid back USD 1 billion to China last Monday against a due amount of $1.3 billion and it was hoped that the amount would be returned.

Pakistan's economy is tethering on the verge of default as the IMF is pushing the county to its limits to fulfil demands – which Islamabad insists had been already met – to provide the remaining $2.5 billion out of a bailout package of $6.5 billion agreed in 2019.

The entire amount is unlikely to be paid as the programme is ending on June 30 but Pakistan is pushing for a tranche of $1.1 billion as a symbolic gesture of endorsement of its policies by the Washington-based fund. The country is not getting multilateral loans or even bilateral assistance without the support of the IMF. Only China has stood fast to help Pakistan while Saudi Arabia and the UAE have also been selectively supportive.

Dar earlier lashed out at the IMF and alleged that geopolitics was behind its loan package as global institutions wanted Pakistan to default like Sri Lanka and then enter negotiations. Pakistan feverishly exploring an option to keep its economy afloat in the absence of IMF support. The policy option announced by Dar shows that Pakistan will pay multilateral loans on time while discussing the rollover of bilateral loans with individual countries. Pakistan feverishly exploring an option to keep its economy afloat in the absence of IMF support.

It is hoped that China will roll over $4 billion of bilateral loans as the country looked forward to rolling over about $9 billion loans with different nations in the next fiscal year beginning July 1. Pakistan is also looking at refinancing a loan of USD 300 million from the China Development Bank which matures on June 30.

First Published:Jun 17, 2023 1:19 PM IST