According to a media report on Saturday, Islamabad’s all-weather ally China will provide USD 2.5 billion in loans to Pakistan to boost the foreign exchange reserves.
Pakistan is under tremendous financial pressure because of drying up of foreign cash reserves and mounting external debt. The country’s USD 8.12 billion reserves is below the minimum level that the International Monetary Fund (IMF) and the World Bank (WB) prescribe.
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“Beijing will place the USD 2.5 billion in deposits with the central bank,” a top Finance Ministry official in Islamabad told The Express Tribune. With the anticipated USD 2.5 billion deposits, China’s contribution in this fiscal year alone would surge to USD 4.5 billion, the paper said.
Pakistan has struggled to maintain reserves that are not currently sufficient to provide cover to even two months of imports despite receiving USD 4 billion in loans from two Middle-Eastern countries.
In July, China deposited USD 2 billion with the State Bank of Pakistan. In the past five years, China has emerged as Pakistan’s single largest saviour in times of economic crisis.
After becoming the Prime Minister, Imran Khan visited China, Saudi Arabia and the UAE to mobilize and arrange the emergency loans to avoid a looming default. Pakistan has secured USD 14.5 billion worth of commitments from these three countries that have helped largely bridged the external financing gap of the ongoing fiscal year.
A strong critic of loans to run the country, Mr. Khan, due to extremely low level of foreign currency reserves, has sought loans from other countries. The huge requirements standing above USD 25 billion, Saudi Arabia promised provide a USD 6 billion financial assistance package. The UAE has agreed to provide USD 3 billion in loans and has already disbursed USD 1 billion.
Imran Khan led Pakistan Tehreek-e-Insaf (PTI) government blames expansionary fiscal policies of the Pakistan Muslim League-Nawaz (PML-N) government for the overvalued exchange rate and the current external sector problems.
Since July, the rupee has been devalued by more than 15 per cent but exports could not pick.