Pakistan has formally approached China to expedite the refinancing of a $1.3 billion commercial loan, with the funds expected to be disbursed later this month once both sides finalize the remaining terms of the agreement.

According to sources familiar with the matter, Pakistani and Chinese authorities are currently engaged in discussions to complete the refinancing process as early as possible. The expected inflow is anticipated to provide timely support to the country's foreign exchange reserves following significant external debt repayments made in recent weeks.

The refinancing request follows Pakistan's repayment of approximately $2.2 billion in external debt during July 2026, including the settlement of the $1.3 billion Chinese commercial loan. The new financing is expected to partly replenish reserves and ease external liquidity pressures.

Separately, the government expects the State Bank of Pakistan (SBP) to purchase more than $7 billion from the interbank foreign exchange market during the current fiscal year. The acquired foreign currency is expected to be used for external debt servicing while also strengthening the country's reserve position.

According to the latest SBP data, Pakistan's total liquid foreign exchange reserves stood at $22.44 billion as of July 24, 2026. Of this amount, the central bank held $17.03 billion, while commercial banks accounted for $5.41 billion.

The SBP reported that its reserves declined by $229 million during the week ended July 24, mainly due to external debt repayments. The anticipated refinancing from China is expected to partially reverse the recent decline and provide additional support to Pakistan's external financing position as the country continues to meet its debt obligations while maintaining adequate foreign exchange reserves.