The People’s Bank of China, the country’s central bank, said Thursday it had extended a currency swap agreement with the State Bank of Pakistan, XinhuaNet reported.
The swap is sized at 20 billion yuan (3.1 billion U.S. dollars) or 351 billion Pakistani rupees, according to a statement from the bank.
The two parties believe the extension will facilitate bilateral trade and investment to help economic development in the two countries.
In an interview to the daily, the State Bank of Pakistan Governor Tariq Bajwa confirmed the loans were made by Beijing-backed banks on good rates.
“The money strengthens the financial, political and military ties between the two countries,” the top Pakistani banker was quoted as saying by the newspaper.
“Chinese commercial banks are awash with liquidity,” Bajwa said.
Pakistan’s foreign exchange reserves have dropped from $18.1 billion in April last year to $10.8 billion in May this year.
According to the article, Pakistani officials also hope that borrowing from Chinese banks will also save Pakistan from seeking help from the International Monetary Fund (IMF).