Pakistan requests $2 billion financial assistance from China

NEW DELHI: Pakistan, facing a severe financial crisis, has reached out to its ally ‘all-weather friend’ China for assistance.
According to The Express Tribune newspaper, the caretaker Prime Minister Anwaarul Haq Kakar has sent a letter to Chinese Premier Li Qiang, requesting a rollover of a $2 billion loan. The loan from China is set to mature on March 23.
In his letter, Kakar expressed gratitude to China for its previous financial aid, which has helped stabilize Pakistan’s foreign exchange reserves and alleviate the pressure of external debt payments. Pakistan has received a total of $4 billion in loans from China. Earlier this month, the UAE also rolled over a maturing loan of $2 billion, and Saudi Arabia has deposited $5 billion with the State Bank of Pakistan.
Following the rollover of the UAE loan, the interim government has approached the International Monetary Fund (IMF) for talks regarding the final tranche of a $1.2 billion loan. The IMF’s next mission is crucial for securing the last loan tranche and initiating negotiations for a new long-term program.
Former finance minister Ishaq Dar, speaking in a recent interview, stated that if his party, the Pakistan Muslim League-Nawaz (PML-N), wins the elections and forms the government, they will make a decision about the new IMF program promptly. Dar also mentioned that if his party decides not to enter the IMF program, they will immediately implement measures to tighten the belt.
The IMF has made some adjustments in its staff-level report on Pakistan’s financing. Budget support loans have been projected to increase to $3 billion, while project financing has been reduced to $3.7 billion for this fiscal year. The overall external financing requirements have been slightly reduced to just under $25 billion, with minor adjustments in the current account deficit projections.
Pakistan’s economic situation is dire, and without long-overdue structural reforms, the country faces a significant risk of financial default. The staggering debt levels, amounting to nearly $125 billion owed to external creditors by 2023, with approximately one-third owed to China, are the primary cause of Pakistan’s economic woes.
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