China agrees to help Pakistan repay Saudi Arabia

China will pay $1 to $1.5 billion to rescue Pakistan

Karachi: Earlier this week the Pak-China relations took another turn as China agreed to give Pakistan $1 to $1.5 billion so that it can remove its burden of debt. With this much finance, the government will be able to pay off the outstanding payment to the Kingdom of Saudi Arabia

The sources have confirmed that Islamabad is ready to come clean by repaying the $2 billion Saudi debt. The $1 billion will be paid on Monday while the remaining $1 billion will be paid next month in January, said the Ministry of Finance.

This was not the first time that China has come forward to save Pakistan.

Nonetheless, China has not provided the loan from its State Administration of Foreign Exchange called SAFE deposits nor did it extend a commercial loan instead both countries have consented to increase the size of a 2011 bilateral Currency-Swap Agreement known as CSA by adding 10 billion Chinese Yuan or $1.5 billion.

Currency Swap Agreement

According to the central bank, bilateral currency-swap agreement was signed between the SBP and the 
People’s Bank of China (PBOC) in December 2011 “to promote bilateral trade, finance direct investment, and provide short-term liquidity support.” the initial deal was extended in December 2014 for term of three years with cumulative cap of 10 billion yuan or $1.5 billion. It was also expanded for a total of three years in May 2018, rising to 20 billion yuan or $billion.
This deal will expire in May of next year, which the central bank has agreed to ask China 
to extend for another three years.

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