Financial Assistance Requested from China by Pakistan: $2 Billion for a Year
Cash-strapped Pakistan has turned to its close ally China for financial assistance, seeking a loan of $2 billion for a year, as reported by The Express Tribune newspaper. In a letter to Chinese Premier Li Qiang, caretaker Prime Minister Anwaarul Haq Kakar requested the rollover of the debt as the deposit time for the loan from China is set to expire on March 23.
This request comes after Pakistan secured a total of $4 billion in loans from China, which has helped alleviate the mounting pressure on external debt payments and stabilized the country’s foreign exchange reserves. Earlier in January, the UAE rolled over a maturing loan of $2 billion for Pakistan, while Saudi Arabia deposited $5 billion with the State Bank of Pakistan.
The interim government has also reached out to the International Monetary Fund (IMF) for talks regarding the last loan tranche of $1.2 billion. The IMF’s next mission is crucial for securing this tranche and initiating negotiations for a new long-term program. Former finance minister Ishaq Dar, speaking on behalf of the Pakistan Muslim League-Nawaz (PML-N), stated that a decision on the new IMF program would be made promptly if his party won the elections and formed the government.
The IMF has made adjustments in its staff-level report, increasing budget support loans to $3 billion but cutting project financing to $3.7 billion for the fiscal year. The overall external financing requirements have been reduced to just under $25 billion, with minor adjustments in current account deficit projections. Pakistan’s economic challenges stem from staggering debt levels, with approximately $125 billion owed to external creditors, one-third of which is owed to China.
The country is in dire need of structural reforms to avoid a financial default, as urged by global creditors like the IMF and the World Bank. The situation remains critical as Pakistan navigates its economic challenges and seeks support from its allies and international financial institutions.