Cash-strapped Pakistan is facing economic turmoil, with a staggering debt of nearly USD 125 billion owed to external creditors, one-third of which is owed to China. In a bid to alleviate its financial crisis, caretaker Prime Minister Anwaarul Haq Kakar has sought a USD 2 billion loan from China.
In a letter addressed to Chinese Premier Li Qiang, Kakar expressed gratitude for China’s ongoing financial assistance during Pakistan’s economic crisis. The request aims to roll over the debt, with the deposit time for the loan from China set to conclude on March 23.
China has played a crucial role in stabilizing Pakistan’s economy by providing a total of USD 4 billion in loans. This assistance has relieved mounting pressure on external debt payments and bolstered foreign exchange reserves.
The recent loan rollover by the UAE, along with Saudi Arabia’s deposit of USD 5 billion with the State Bank of Pakistan, has further eased Pakistan’s financial burden. The interim government has subsequently approached the International Monetary Fund (IMF) for talks on the last loan tranche of USD 1.2 billion.
Former finance minister Ishaq Dar, speaking on behalf of the Pakistan Muslim League-Nawaz (PML-N), highlighted that decisions regarding the IMF programme would be expedited if his party won the elections. Dar emphasized that if the PML-N opted out of the IMF programme, immediate implementation of belt-tightening measures would commence.
The IMF’s recent adjustments in its staff-level report have increased budget support loans to USD 3 billion while reducing project financing to USD 3.7 billion for the fiscal year. Overall external financing requirements have been revised to just under USD 25 billion, with minor adjustments in current account deficit projections.
Pakistan’s economic challenges persist, and there is a looming risk of a significant financial default. Urgent structural reforms are needed, as emphasized by global creditors such as the IMF and the World Bank, along with bilateral partners like China and the UAE. The nation awaits critical decisions to navigate through these economic uncertainties.