The Industrial and Commercial Bank of China approved Friday a rollover of a $1.3 billion loan for Pakistan, a country that is suffering economically, helping it shore up depleting foreign exchange reserves, Finance Minister Ishaq Dar said.

The facility will be disbursed in three installments. The first one of $500 million has been received by Pakistan's central bank, Dar said in a tweet, noting that it would "It will increase forex reserves."

Formalities completed & Chinese Bank, ICBC approved rollover of US$1.3 billion facility which has been repaid by Pakistan to ICBC in recent months. Facility will be disbursed in 3 instalments, first one of US$500 million has been received by SBP. It will increase forex reserves!

— Ishaq Dar (@MIshaqDar50) March 3, 2023

The money, repaid by Pakistan to the ICBC in recent months, according to Dar, is crucial for the South Asian economy facing a balance of payment crisis, with its central bank foreign exchange reserves dropping to levels barely able to cover three weeks of imports.

Islamabad already received some $700 million in a loan from China to help boost its forex reserves, with Dar saying the total $2 billion in effect Pakistan borrowing back the debt repayments it paid to Beijing for previously agreed loans.

Moreover, the finance minister explained that his country would require $5 billion in external funding to bridge its funding shortfall this fiscal year ending in June.

Pakistan will receive more outside financing after the government signs with the International Monetary Fund a deal regarding further loans, which Dar said should be done by next week.

Islamabad has been negotiating with the IMF the deal since early February to clear its ninth review, which will grant Pakistan $1 billion, part of the $6.5 billion agreed upon in 2014 if it is approved by the board.

"We will, God willing, take this country out of this quagmire," Dar said as he quelled any concerns about the country defaulting.

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Since January 31, the IMF has been in talks with the Pakistani government to discuss the review of the $7 billion Extended Fund Facility (EFF). The delegation reportedly left on  February 9 after failing to reach a staff-level agreement. 

Dar announced in early February that Islamabad received a draft Memorandum of Economic and Financial Policy from the IMF on the completion of the ninth review of a $7 billion loan program.

Since January 31, the IMF has been in talks with the Pakistani government to discuss the review of the $7 billion Extended Fund Facility (EFF). The delegation reportedly left on February 9 after failing to reach a staff-level agreement. 

Following the IMF team's departure from Pakistan, the country's Finance Minister Ishaq Dar said the negotiations "concluded successfully" and that the lender's policies were shared with the government as terms to move forward.

Dar told reporters: "I confirm that we received the draft memorandum on economic and financial policy at 9 a.m. today [04:00 GMT]. We will fully study it over the weekend and have a virtual meeting [with the IMF officials]. Obviously, it will take a few days."

Once the draft memorandum is submitted, both parties will proceed with discussions on policy measures that are outlined in the document. A staff-level agreement will then be signed and sent to the IMF executive board for approval. 

Despite earlier talks with friendly countries on financial bailouts, Pakistan was forced to give in to the IMF terms as the country faced a very critical economic and financial state and is unable to wait for the results of the talks.

The IMF is pushing Pakistan to back a viable amount of US dollars deposited in domestic banks through guarantees from countries such as China, UAE, and Saudi Arabia, in addition to the World Bank.

Except for basic essential medicines and food, the Asian country has halted giving letters of credit (LOCs), which resulted in a backlog of tens of cargo ships that the country can no longer pay for. 

Pakistan has entered previously a dangerous phase following the ousting and assassination attempt on the highly popular former Prime Minister Imran Khan and his accusation that it was a plan involving his successor Shehbaz Sharif and other governmental figures.

In 2019, Khan negotiated a loan package from the IMF. However, he failed to meet the demands on cutting subsidies and market direct intervention, which caused the issue to be stalled.