China has agreed to provide US$1.5 billion in loans to Pakistan to repay its US$2 billion Saudi Arabia debt.
Today (14 December) was the deadline for Pakistan to return the $1 billion, and the remaining US$1 billion is due in January, reports Express Tribune.
However, China has not provided the loan from its State Administration of Foreign Exchange, commonly known as SAFR deposits, nor has it given a commercial loan to Islamabad.
This time both the countries have agreed to augment the size of a 2011 bilateral Currency-Swap Agreement (CSA) by an additional 10 billion Chinse Yuan or around $1.5 billion, a sources said. This has increased the size of the overall trade facility to 20 billion Chinese Yuan or $4.5 billion.
The CSA is a Chinese trade finance facility that Pakistan has been using since 2011 to repay foreign debt and keep its gross foreign currency reserves at comfortable levels instead for trade related purposes.
The benefit of this arrangement will be that the additional $1.5 billion Chinese loan will not reflect on the book of the federal government and it will not be treated as part of Pakistan's external public debt.
Spokespersons for both the SBP and the finance ministry neither denied nor confirmed the development. The spokesperson for the central bank ducked the questions while the ministry of finance said that it was a "bilateral confidential matter".
The Express Tribune had sent questions to the SBP about the CSA and a delay in uploading data on currency circulation, M2, on its website. "The M2 data will be updated soon on the website" was the terse response of the central bank, while maintaining silence on the question of currency deal.