Islamabad, Feb. 8 -- Pakistan has requested China to reschedule USD 3.4 billion debt for two years to bridge a foreign funding gap identified by the International Monetary Fund, according to a media report on Saturday.

This is the second time in the past five months that Islamabad has requested Beijing to reschedule loans provided by its Exim bank.

Deputy Prime Minister Ishaq Dar made the formal request during this week's visit to Beijing, The Express Tribune newspaper reported, quoting government sources.

Pakistan requested the Export-Import (Exim) Bank of China to consider rearrangement of its loans due from October 2024 to September 2027, said the government officials.

A two-year extension was sought to repay the official and guaranteed debt obtained from the Exim Bank. Pakistan would keep making interest payments.

Sources said that Pakistan was required to identify financing sources to fill the external financing gap of USD 5 billion for the three-year programme period.

They added the Chinese authorities were positive and that Beijing would hopefully accept the request to lessen Pakistan's external funding woes. Earlier, in September last year, the Finance Minister wrote to the Exim Bank, requesting the rescheduling.

According to a joint China-Pakistan statement issued on Thursday, the Pakistani side reiterated its high appreciation for China's valuable support for its fiscal and financial stability. The statement was issued after President Asif Ali Zardari's state visit to Beijing.

The USD 3.4 billion debt was maturing between October 2024 and September 2027, which coincided with the three-year IMF programme period. According to the sources, the bank has given two types of loans, direct lending and guaranteed lending to State-Owned Enterprises (SOEs).

The rescheduling is said to be critical for Pakistan and is part of the overall USD 5 billion external financing plan that Islamabad has to implement to bridge the gap identified by the IMF at the time of the bailout package's signing in September last year.

From October 2024 to September 2025, the USD 505 million Exim direct loans to the government would mature, the period that will cover the first two reviews of the IMF programme.

Then, from October 2025 to September 2027, another USD 1.7 billion worth of direct loans to the government would mature. This brings total direct lending that requires a two-year extension to USD 2.2 billion. China's USD 1.2 billion loans to SOEs are also maturing from October 2024 to September 2027, and the majority of those are maturing in October this year.

Published by HT Digital Content Services with permission from Millennium Post.