Pakistan is on the verge of securing $3.3 billion in foreign financing from Chinese banks, a move expected to bolster its dwindling foreign exchange reserves. According to government officials, the deal includes a $2 billion syndicated loan from a consortium of Chinese banks (repayable over three years) and a $1.3 billion refinancing arrangement with the Industrial and Commercial Bank of China (ICBC). If finalized by June 30, these inflows could lift the State Bank of Pakistan’s (SBP) reserves from $11.7 billion (as of June 13) to over $14 billion.
The loans, amounting to Rs924 billion in local currency terms, will help Islamabad meet short-term debt obligations due in early July 2025. However, the Finance Ministry remained tight-lipped on whether the funds would be disbursed in Chinese yuan (RMB) instead of US dollars. Analysts caution that while the injection provides temporary relief, structural reforms remain critical for long-term stability.
The financial lifeline comes amid fresh risks from the global oil market, where prices have climbed to $75-76 per barrel due to escalating Iran-Israel tensions. Experts warn that a potential blockade of the Strait of Hormuz—which handles 20% of global oil shipments—could push prices beyond $85-90, jeopardizing Pakistan’s current account surplus. The country had managed a surplus in FY2024-25, but sustained high oil prices could reverse this progress, straining the import bill and forex reserves.
In a related development, Saudi Arabia provided $100 million in May 2025 under an oil facility, though officials did not clarify if the funds were used for fuel imports or other purposes. With the “Summer Davos” forum highlighting global economic fragility, Pakistan’s reliance on external financing underscores its vulnerability to geopolitical shocks. The coming weeks will test whether these loans and oil market dynamics allow Islamabad to maintain its fragile economic equilibrium—or force tougher adjustments ahead.