“China Extends $2.4 Billion Loan to Pakistan, Easing Economic Crisis Amid Foreign Exchange Boost”

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China provides a lifeline to cash-strapped Pakistan by rolling over a $2.4 billion loan for two years, easing the nation’s economic crisis. The move boosts Pakistan’s foreign exchange reserves, providing relief amid concerns of default. While some analysts express worries about growing Chinese loans, Pakistan’s government emphasizes the importance of friendly financial support from China, Saudi Arabia, and the UAE.

China Rolls Over $2.4 Billion Loan for Pakistan to Ease Economic Crisis
China Rolls Over $2.4 Billion Loan for Pakistan to Ease Economic Crisis

In a significant development to alleviate Pakistan’s economic crisis, China has extended a lifeline to the cash-strapped nation by rolling over a $2.4 billion loan for two years. The move comes as a boost to Pakistan’s fragile foreign exchange reserves, which were previously only sufficient to cover the import bill for a mere two months.

Announcing the development on the X platform, previously known as Twitter, Pakistan’s finance minister Ishaq Dar revealed that the Chinese EXIM Bank has rolled over the “principal amounts” of the $2.4 billion loan that was originally scheduled for repayment in 2024 and 2025. As per the new arrangement, Pakistan will now only make interest payments in both years.

China, a longstanding ally of Pakistan, has played a crucial role in helping the country avoid a default this year. The latest extension in loan maturities by Beijing offers much-needed support to Pakistan’s struggling foreign exchange reserves. However, concerns have been raised in the country about how Islamabad will repay the growing Chinese loans, with some analysts terming it a potential debt trap. The government, however, refutes such assumptions, asserting that the financial cooperation with China is mutually beneficial and strategic.

The recent loan rollover by China comes shortly after the International Monetary Fund (IMF) released a much-awaited first installment of $1.2 billion in Pakistan’s central bank as part of a bailout package aimed at preventing default. This infusion of funds bolstered Pakistan’s foreign exchange reserves, which had dwindled to $4 billion, raising fears of an imminent financial crisis. Following the IMF’s assistance, Pakistan’s foreign exchange reserves climbed to $14 billion.

Pakistan’s engagement with the IMF faced delays since December, primarily due to non-compliance with the terms of the previous $6 billion bailout received by the nation. As a result, Pakistan sought financial assistance from friendly countries like China, Saudi Arabia, and the United Arab Emirates.

China has played a significant role in Pakistan’s economic development through initiatives such as the China-Pakistan Economic Corridor (CPEC). The CPEC encompasses a wide range of mega projects, including road construction, power plants, and agriculture, representing a substantial financial investment by China in Pakistan’s progress.

The economic package provided by China is viewed as a lifeline for Pakistan, which struggled with its financial crisis until June when the country secured a new $3 billion bailout from the IMF.

Prime Minister Shehbaz Sharif recently reassured the nation that Pakistan no longer faces the risk of default. Since taking office in April 2022, Sharif has attributed the country’s economic downturn to alleged corruption during the tenure of former Prime Minister Imran Khan. As the current parliament nears the end of its five-year term, Sharif is expected to step down next month, paving the way for new parliamentary elections under the supervision of an interim government.

Sources By Agencies

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