China Rolls Over a $2 Billion Loan to Pakistan: What a Rollover Is, Why It Mattered and Where the Debt Stands in 2026
In March 2025 China agreed to leave two billion dollars with Pakistan for another year instead of taking it back. This plain-English guide explains what that means, why Pakistan needs such favours every year, how much it owes China and how its position had changed by 2026.
About this article: It was prepared with the help of AI tools from public sources and is being reviewed by our editors. If you spot an error, please let us know so that we can correct it.
⚡ The short answer
In March 2025 China agreed to roll over a 2 billion dollar deposit it keeps at Pakistan’s central bank. Rolling over means not asking for the money back when it falls due, and leaving it for another year. Pakistan did not receive new money. It was spared from repaying old money it did not have. China has done this every March for years, and Saudi Arabia and the United Arab Emirates do the same with deposits of their own. These rollovers are the quiet foundation of Pakistan’s finances: without them its foreign reserves would look very different. By 2026 the reserves had grown much stronger, but the deposits were still there.
- ✅ What: a 2 billion dollar Chinese deposit, due in March 2025, extended for a year
- ✅ Confirmed by: the finance minister’s adviser
- ⚠️ Not new money: a debt postponed, with interest still paid
- ⚠️ 2026: no report found; the deposits are believed to remain
What happened
The announcement was brief. In the second week of March 2025 Khurram Schehzad, adviser to Pakistan’s finance minister, told reporters that China had rolled over a 2 billion dollar loan that was due later that month.
That was all. There was no ceremony and no joint statement. Beijing said nothing. The same thing had happened in March 2023 and March 2024.
Nothing arrived and nothing left. Two billion dollars that could have gone back to Beijing stayed in Karachi for another year. In Pakistan’s finances that counts as good news.
What a rollover is
Imagine you owe a friend a large sum, due on the first of the month. You cannot pay. Your friend says: keep it another year, and carry on paying me the interest. Your debt is exactly what it was. But you have avoided a crisis today.
That is a rollover.
| A new loan | A rollover | A repayment | |
|---|---|---|---|
| Does money come in? | Yes | No | No; it goes out |
| Does the debt rise? | Yes | No | It falls |
| Do reserves change? | They rise | They stay the same | They fall |
| Is interest paid? | Yes | Yes | No longer |
The kind of loan this was
The 2 billion dollars is not an ordinary loan to build something. It is a deposit. China’s foreign-exchange agency has placed the money in an account at the State Bank of Pakistan. Pakistan pays interest on it. It counts as part of the State Bank’s foreign reserves, which makes them look healthier. But it is borrowed, and it can be recalled when its term ends.
China is believed to hold about 4 billion dollars in such deposits. It is not the only one.
| Friendly country | Deposits at the State Bank (approximate) |
|---|---|
| China | 4 billion dollars |
| Saudi Arabia | 5 billion dollars |
| United Arab Emirates | 2 to 3 billion dollars |
Together that is some 12 billion dollars, each slice of which comes up for renewal every year. On top of that, Chinese state banks lend Pakistan several billion dollars in commercial loans, which are also regularly repaid and re-borrowed.
💡 Tip: gross reserves and net reserves
When you read that Pakistan has “reserves of 21 billion dollars”, that is the gross figure: everything in the State Bank’s foreign-currency accounts. Much of it is borrowed, including the deposits from friendly countries. Net reserves subtract what must be paid back in the near future. For years Pakistan’s net reserves were below zero. The gross number tells you whether the country can pay for next month’s imports. The net number tells you whose money it really is.
Why it mattered in March 2025
The repayment mountain
In the financial year that ended in June 2025, Pakistan had more than 22 billion dollars of foreign debt falling due. Its reserves at the time were about half that.
No one expected it to repay 22 billion. The plan, agreed with the International Monetary Fund, assumed that most of it would be rolled over or refinanced.
| Kind of debt due in 2024-25 | Roughly | What was expected |
|---|---|---|
| Deposits from friendly countries | 13 billion dollars | Rolled over |
| Commercial loans, mostly Chinese banks | Several billion | Refinanced |
| Loans from international lenders | Several billion | Repaid, with new loans coming in |
| Bonds | About 1 billion | Repaid |
The IMF’s condition
Pakistan had signed a three-year programme with the IMF in September 2024, worth 7 billion dollars. Before it lent, the Fund required financing assurances: promises from China, Saudi Arabia and the Emirates that they would not withdraw their deposits during the programme.
So the March 2025 rollover was not really a surprise gift. It was China keeping a promise on which the whole programme rested. And it came just as IMF staff were in Islamabad for the programme’s first review, which would release another billion dollars. A refusal by Beijing would have sunk it.
The follow-up
In May 2025 it was reported that China would also refinance about 3.7 billion dollars of commercial loans before the end of June, including money Pakistan had repaid to a Chinese bank a few weeks earlier and which was to be lent again.
Is it a favour?
The old headline on this page called it a “big money favour”. That is half right.
Why it is a favour. China could ask for its money. It does not have to keep lending to a country that came within weeks of default in 2023. No commercial lender would have left such sums there on such terms.
Why it is not.
- Pakistan pays interest, reported at around 7 per cent on one of these deposits in 2024. On 4 billion dollars that is well over 250 million dollars a year. This is not cheap money.
- China has its own interests. It has lent and invested tens of billions in Pakistan. A Pakistani default would damage those investments and embarrass its flagship overseas programme.
- It gives leverage. A lender who can recall 4 billion dollars at twelve months’ notice is listened to, on power-plant payments, on the security of Chinese workers and on foreign policy.
A fairer word might be arrangement. Both sides get something.
How much Pakistan owes China
China is Pakistan’s largest single creditor.
| Type of debt | Roughly |
|---|---|
| Government-to-government loans, mostly for projects | Over 20 billion dollars |
| Deposits at the State Bank | 4 billion dollars |
| Commercial loans from Chinese banks | Several billion dollars |
| Total owed to China | Close to 30 billion dollars, or more than a quarter of Pakistan’s foreign debt |
There is a further category. Chinese companies built and own many of Pakistan’s newer power plants. The government owes them large unpaid bills for electricity. Those arrears are not counted as foreign debt, but the companies and Beijing press for them constantly.
The request that went unanswered
Since 2024 Pakistan has asked China to go beyond annual rollovers and stretch out the repayment of its power-sector loans over many more years. That would lower electricity prices and ease the pressure for good. China has been reluctant. Agreeing to restructure one country’s debts would invite requests from dozens of others.
How Pakistan came to owe China so much
The debt was not built up by accident or in a hurry. It came in three stages.
Before 2013: modest. China was an old ally and a supplier of weapons and nuclear power stations, but not a large lender. Most of Pakistan’s foreign debt was owed to Western governments, Japan and the international banks.
2013 to 2019: the corridor. China launched its worldwide building programme and made Pakistan its showpiece. Under the economic corridor the two countries announced projects first valued at 46 billion dollars and later at more than 60 billion. Much of that was commercial investment in power plants, which is not government debt. But the roads and railways were built on loans, and the imported machinery for all of it drained Pakistan’s dollars.
2018 onwards: the rescues. By 2018 the import bill had emptied the reserves. From then on China’s lending changed character. It stopped being mainly about building things and became about keeping Pakistan solvent: deposits at the central bank, emergency loans from state banks and the refinancing of both.
| Stage | Kind of money | Purpose |
|---|---|---|
| Before 2013 | Small project loans | Particular projects |
| 2013 to 2019 | Large project loans and investment | Roads, power plants, a port |
| 2018 onwards | Deposits and bank loans | To cover Pakistan’s shortage of dollars |
Researchers who study Chinese lending have found the same pattern across dozens of countries: the builder becoming the lender of last resort. Pakistan is among the largest recipients of this kind of rescue lending anywhere.
The argument about a “debt trap”
Critics in the West, and some in Pakistan, describe all this as a trap: lend a poor country more than it can repay, then take its ports or its foreign policy in return.
The evidence for that in Pakistan’s case is thin.
- China has not seized anything. The port at Gwadar is run by a Chinese company under a long lease agreed before the big loans.
- China has rolled over, every time. A lender setting a trap would call in the money.
- Pakistan’s crisis is home-made. The country had needed rescue from the IMF many times before China lent it a dollar.
But the defenders of the relationship overstate their case too.
- The terms are not public. Parliament has never seen the full contracts.
- The interest is high by the standards of aid, closer to commercial rates.
- The power deals were generous to the Chinese investors, and Pakistanis pay for them in their electricity bills.
- Dependence narrows choices. A government that needs Beijing’s signature every March is careful what it says and does.
The fairest description may be the least dramatic. China lent heavily to a friend for reasons of strategy and profit. The friend borrowed more than was wise. Neither can now walk away, so both keep extending the arrangement a year at a time.
What changed by 2026
Eighteen months after that rollover, Pakistan’s position looked very different on the surface.
| Measure | March 2025 | September 2026 |
|---|---|---|
| State Bank reserves | About 11 billion dollars | About 21 billion dollars |
| Import cover | About two months | More than three months |
| Credit rating (S&P) | CCC+ | B |
| Access to bond markets | Shut | Reopened: a dollar bond in April 2026 and a Chinese-currency bond in May |
| Inflation | Under 2 per cent | About 10 per cent |
The Chinese-currency bond is worth a note. In May 2026 Pakistan sold its first “Panda bond”, borrowing directly from investors in China’s own market, in yuan. It was small. Its significance is that it is a market loan, not a favour.
What did not change
The friendly deposits are still there. No report was found of the March 2026 rollover, but there is no sign that Pakistan repaid the money, and the IMF programme, which runs to late 2027, still depends on those deposits staying put.
Put plainly: of the 21 billion dollars in the State Bank’s reserves, roughly 12 billion is other countries’ money on short-term deposit. The improvement is real. It is also less than it looks.
⚠️ A stronger position is not an independent one
It is tempting to read record reserves as proof that Pakistan no longer needs anyone’s help. It would be more accurate to say that Pakistan has moved from needing rollovers to survive the month to needing them to keep its numbers respectable. The test of real recovery will be the year Pakistan repays one of these deposits from money it has earned by exporting, and does not need to borrow it straight back.
How other countries fared
Pakistan’s experience is the gentle version of a story that went differently elsewhere.
| Country | What happened |
|---|---|
| Sri Lanka | Ran out of reserves and defaulted in 2022; years of negotiation with China and others followed |
| Zambia | Defaulted in 2020; a restructuring deal took more than three years |
| Pakistan | Came close in 2023; kept afloat by rollovers and an IMF programme |
The difference is partly size and partly geography. Pakistan matters more to China, to the Gulf states and to the West than most borrowers do. That has been its safety net. It has also allowed it to put off reforms that smaller countries were forced into.
Who decides, and who is told
A last point, about how such decisions are made.
When China rolls over a deposit, there is no vote in Parliament and usually no document published. The arrangement is made between the finance ministry, the State Bank and their Chinese counterparts. The public learns of it from a remark to reporters, as in March 2025, or from the central bank’s weekly figures, which simply fail to fall.
Under the Constitution, the federal government may borrow within limits set by Parliament, and a law passed in 2005 caps public debt as a share of the economy. In practice those limits have been breached for years, and the detailed terms of loans from friendly governments are treated as confidential. Members of the finance committees of both houses have complained that they are asked to approve budgets built on borrowing they are not allowed to examine.
The IMF has pressed for more openness, and Pakistan now publishes more about its debt than it did. The terms of the Chinese deposits are still not among the things published.
What ordinary Pakistanis should take from this
- Reserves are what stand between the country and a shortage of fuel, medicine and machinery. When they fell to three weeks of imports in 2023, factories closed.
- Rollovers kept that from happening again.
- They are not free. The interest is paid from taxes.
- They come with expectations, not all of which are published.
- The way out is not a bigger favour. It is exports. A country that earns more dollars than it spends does not need to ask.
✅ Key point
The rollover of March 2025 was routine, which is exactly the point. Pakistan’s solvency depends on three friendly governments agreeing, every year, not to ask for their money back. They have always agreed. That reliability is a strength. That dependence is a weakness. Both remained true in 2026, even with the reserves at a record.
Words used in this article
| Term | Plain meaning |
|---|---|
| Rollover | Extending a loan when it falls due, instead of repaying it |
| Deposit | Here, money a foreign government places at Pakistan’s central bank, on which interest is paid |
| Reserves | Foreign currency held by the central bank |
| Refinance | To repay a loan with a new loan |
| Restructure | To change a loan’s terms, for example by stretching out repayment |
| Default | Failure to repay a debt on time |
| Creditor | A lender |
| Financing assurance | A lender’s promise, given to the IMF, to keep its money in place |
| Panda bond | A bond sold in China’s market, in Chinese currency, by a foreign borrower |
| External debt | Money owed to lenders abroad |
Timeline
| Date | Event |
|---|---|
| 2018 to 2019 | China, Saudi Arabia and the Emirates first place large deposits at the State Bank |
| March 2023 | China rolls over 2 billion dollars |
| Mid-2023 | Pakistan narrowly avoids default |
| March 2024 | Another rollover |
| September 2024 | IMF programme approved, resting on assurances from the three countries |
| March 2025 | The rollover in this article |
| May and June 2025 | Chinese commercial loans refinanced |
| April 2026 | Pakistan returns to the international bond market |
| May 2026 | First Panda bond |
| September 2026 | Reserves reach a record |
For how borrowing is approved and reported to Parliament, read our explainer on the National Assembly.
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Frequently asked questions
❓ What does it mean that China “rolled over” a loan?
China agreed not to take back 2 billion dollars when it fell due, and to leave it with Pakistan for another year. No new money was lent.
❓ When did it happen?
It was confirmed in March 2025 by the adviser to Pakistan’s finance minister. The deposit was due later that month.
❓ Does Pakistan pay interest on the deposit?
Yes. The rate on one such deposit was reported at about 7 per cent in 2024.
❓ How much does Pakistan owe China?
Close to 30 billion dollars in all, more than a quarter of Pakistan’s foreign debt, according to commonly cited estimates.
❓ Why does the IMF care about these rollovers?
Its programme is built on the assumption that China, Saudi Arabia and the United Arab Emirates will keep their deposits in place. Without that assurance it would not lend.
❓ Did China roll over the loan again in 2026?
No report was found when this article was written. There is no sign that it was repaid.
❓ Are these deposits part of Pakistan’s reserves?
Yes. They are counted in the State Bank’s gross reserves, although they are borrowed.
❓ Is a rollover good or bad?
It avoids an immediate crisis, which is good. It leaves the debt in place and the interest running, which is a cost. It is a sign of dependence, not of strength.
❓ How could Pakistan stop needing rollovers?
By earning more foreign currency than it spends, mainly through higher exports, so that it can repay the deposits from its own money.
Sources
- Reuters, via Yahoo News, “China rolls over $2 billion loan to Pakistan” — March 2025.
- Mettis Global, “China rolls over $2bn loan to Pakistan” — March 2025.
- Mettis Global, “China to roll over $3.7bn to Pakistan by June end” — May 2025.
- Geo News, “China ‘rolls over’ $2 billion loan to Pakistan amid ‘difficult economic situation'” — 2024.
- ProPakistani, “Dar confirms rollover of $2 billion Chinese loan, says process no longer pending” — 31 March 2023.
- ARY News, “SBP foreign exchange reserves hit all-time high to $26.8 billion” — September 2026.
- ProPakistani, report on the Finance Ministry’s annual debt review for 2025-26 — 1 October 2026.
- State Bank of Pakistan — for official reserves data.
