Amidst worsening external debt servicing indicators, the federal cabinet has decided to obtain $1 billion loan from a Chinese bank to retire a liability of almost similar amount – including Eurobond debt incurred during the rule of Gen (retd) Pervez Musharraf.The decision to obtain yet another major loan from a Chinese institution comes at a time when the debt servicing-related payments to China have grown almost three times during the past one year.In its second last meeting, the federal cabinet had approved signing a foreign commercial facility agreement of $1 billion with the China Development Bank, according to official documents.It will be the second time in the current fiscal year that the China Development Bank would extend the credit to help Pakistan meet its foreign debt-related obligations.Earlier, the China Development Bank gave $700 million at an interest rate equivalent to 4.44% for a period of three years, showed the documents.The fresh loan will be utilised for balance of payments and budgetary support, according to the Ministry of Finance.While addressing the launching ceremony of the Economic Survey of Pakistan last week, Finance Minister Ishaq Dar had said that in June Pakistan would be retiring two foreign loans of $1.05 billion – including $750 million Eurobond.Without disclosing the source of borrowing, Dar said the government had made arrangements for returning both the loans next month.In 2007, the Musharraf government had issued 10-year bonds at a 6.875% interest rate, maturing this week.Pakistan has been struggling to maintain its official foreign currency reserves that it has built largely by obtaining expensive foreign loans during the past four years.The government’s failure to enhance exports and attract foreign investment complicated the matters for it. The official reserves of the SBP stood at $16.1 billion – including $3.9 billion short-term borrowings. By excluding short-term borrowings, the central bank’s reserves are around $12 billion.From July through March of the current fiscal year, Pakistan’s external debt servicing – including interest payments – consumed $3.9 billion, according to the Economic Survey of Pakistan.The nine-month debt servicing ate up 24.2% of our export receipts – the highest figure during the past 14 years, suggesting worsening of the external debt indicators.Not only that, the nine-month debt servicing was equivalent to 10.3% of Pakistan’s foreign exchange earnings of this period –also the highest ratio during the last 14 years, showed the Economic Survey.Since the size of the economy expanded this year, external debt servicing in terms of the total size of Gross Domestic Product was 1.3% of GDP in nine months.During the last fiscal year, the debt servicing cost was 1.5% of GDP.From July through March, Pakistan paid $893.5 million to China on account of principal amount as well as interest on that. The figure was almost 286% more than $311.5 million that Pakistan had paid to China during the last fiscal year 2015-16.For FY2016-17, the government had budgeted $8 billion in foreign loans, but the figure may cross the $11 billion mark, sources said. If the revised borrowing plan materialises, this will be the highest-ever borrowing in a single year in the country’s history.For the outgoing fiscal year, the government had budgeted $2 billion loans from foreign commercial banks. But the revised estimates show that the figure may go up to $3.7 billion. About 62% of foreign commercial loans – $2.3 billion to be precise – are coming from Chinese financial institutions alone.The Industrial and Commercial Bank of China has already given $300 million at 3.94% interest rate for two years. Pakistan also hopes to receive $300 million from the Bank of China.With fresh borrowings, the Chinese contribution in Pakistan’s official foreign currency reserves held by the SBP would increase to $2 billion.In addition to the borrowings from China, Pakistan also obtained $315 million from the Noor Bank of the United Arab Emirates. However, the Noor Bank borrowings are relatively cheaper than the Chinese loans. The Noor Bank has given $315 million at an interest rate equivalent to 4.22% for two years.Growing China-Pakistan Economic Corridor-related imports, decline in exports, absence of the Coalition Support Fund and slowdown in remittances have compounded the government’s external sector woes.These factors pushed the current account deficit to $7.4 billion in the first ten months of this fiscal.A recent report of Moody’s International has forecast Pakistan’s total external debt growing to $79 billion by the end of this fiscal.