In another sign of Islamabad’s growing reliance on Beijing for financial support, Pakistan expects to obtain fresh Chinese loans worth $1-2 billion to help it avert a balance of payments crisis, reported the Dawn.
Lending to Pakistan by China and its banks is on track to hit $5bn in the fiscal year ending in June, according to recent disclosures by officials and the finance ministry data reviewed by Reuters.
The ramp up in China’s lending comes as the United States is cutting aid to Pakistan following a fracture in relations between the on-off allies. In February, Washington led efforts that saw Pakistan placed on a global terror financing watch list, drawing anger in Islamabad amid fears it will hurt the economy.
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The new Chinese loans that are being negotiated will help bolster Pakistan’s rapidly-depleting foreign currency reserves, which tumbled to $10.3bn last week from $16.4bn in May 2017.
The talks come only weeks after a group of Chinese commercial banks lent $1bn to Pakistan’s government in April.
The reserves decline and a sharp widening of Pakistan’s current account deficit have prompted many financial analysts to predict that after the general election, likely in July, Islamabad will need its second International Monetary Fund (IMF) bailout since 2013. The last IMF assistance package was worth $6.7bn.
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Beijing’s attempts to prop up Pakistan’s economy follow a deepening in political and military ties in the wake of China’s pledge to fund badly-needed power and road infrastructure as part of the $57bn China-Pakistan Economic Corridor (CPEC), a key cog in Beijing’s vast Belt and Road initiative.
“I think this month we will get that $1-2bn,” said a senior Pakistan government official, saying the funds will come from Chinese state-run institutions.
