China has agreed to extend the maturity of a $2 billion loan to Pakistan on existing terms. The agreement involves delaying the payment of the $2 billion loan, originally maturing on March 23, 2024. China has informally conveyed its decision to extend the amortization, and the Ministry of Finance is awaiting a formal response before issuing a circular.

China had initially requested a higher interest rate on the sum, compared to the existing 7.1 percent interest based on the 6M Secured Overnight Finance Rate (SOFR) plus 1.715 percent. In January, Caretaker Prime Minister Anwar Haq Kakar wrote a letter to Chinese Prime Minister Li Keqiang requesting a one-year extension in the repayment of the $2 billion loan.

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Out of the $4 billion deposits received from China, $2 billion is set to mature on March 23, 2024. Pakistan sought a one-year extension on the repayment, and the decision to extend the loan’s maturity will provide the country with essential fiscal flexibility. Additionally, the United Arab Emirates recently rolled over two deposits of $1 billion each for one more year.