ISLAMABAD:According to Prime Minister Shehbaz Sharif, China has extended a US$600 million loan to Pakistan, bolstering its foreign exchange reserves in the wake of a long-awaited agreement with the International Monetary Fund (IMF).



In the past three months, China had already extended more than $5 billion in loans to Pakistan, saving the country from default as talks to obtain the IMF rescue dragged on.

At a gathering in Islamabad, Sharif announced, "We have received another US$600 million from our friend China."

Pakistan's foreign exchange reserves decreased to the point where they could barely cover a month's worth of regulated imports during the lengthy IMF negotiations, and a severe balance of payment crisis brought the nation to the verge of collapse.

On June 30, the IMF eventually agreed to provide Pakistan with a US$3 billion rescue; a US$1.2 billion initial installment was then given.

According to Finance Minister Ishaq Dar, an additional US$3 billion in financial assistance from Saudi Arabia and the United Arab Emirates after the IMF agreement helped stabilise the Pakistani economy.

The current account posted a surplus of US$334 million in June, according to the central bank of Pakistan, while the trade deficit decreased by 62% year over year.

In the fiscal year ending June 30, Pakistan's trade deficit reduced 43% from the previous year to US$27.6 billion.

Dar stated in a recorded statement after the central bank revealed the data that the year's current account deficit was $2.56 billion, down from $17.48 billion in the fiscal year 2022.

"That's how Pakistan didn't default, God be praised," he continued. "At the moment, we are in a safe zone."

Another important goal of the programme is to achieve a real effective exchange rate for the Pakistani rupee.

The rupee has been strengthening as a result of the IMF agreement, but it fell 1.1 percent in the interbank market on Tuesday to 282.5 rupees against the US dollar, according to Refinitiv.

Analysts say the drop is due to increased dollar demand following the relaxation of Pakistan's import restrictions.

(Ariba Shahid in Karachi contributed reporting, while Christina Fincher and Tom Hogue edited the piece.)