Cash-strapped Pakistan has reached out to its close ally China, Pakistan seeks financial assistance of USD 2 billion for a year, as reported on Saturday, 27th January 2024. In a letter to Chinese Premier Li Qiang, caretaker Prime Minister Anwaarul Haq Kakar expressed gratitude for China’s ongoing financial support during Pakistan’s economic crisis. Kakar requested the rollover of a debt as the deposit term for the loan from China is set to conclude on March 23. Pakistan has secured a total of USD 4 billion in loans from China, alleviating pressure on external debt payments and stabilizing foreign exchange reserves.
Earlier this month, the UAE extended a rollover of Pakistan’s maturing loan of USD 2 billion. Additionally, Saudi Arabia has deposited USD 5 billion with the State Bank of Pakistan. Following the UAE’s loan rollover, Pakistan’s interim government urged the International Monetary Fund (IMF) to send a new mission for talks on the last loan tranche of USD 1.2 billion. The outcome of the IMF mission is crucial for securing the final loan tranche and initiating negotiations for a new long-term program.
Former Finance Minister Ishaq Dar stated that if his party, the Pakistan Muslim League-Nawaz (PML-N), wins the elections and forms the government, a decision on the new IMF program would be made promptly. Dar added that if his party opts not to enter the IMF program, it would swiftly implement necessary fiscal measures.
The IMF, in its latest staff-level report, adjusted projections for financing to Pakistan. While it increased the projection of budget support loans to USD 3 billion, it reduced project financing to USD 3.7 billion for the fiscal year. The overall external financing requirements were adjusted to just under USD 25 billion, with minor changes in current account deficit projections.
Pakistan faces economic challenges, and there are concerns about a significant financial default without essential structural reforms recommended by global creditors such as the IMF, the World Bank, and bilateral partners like China and the UAE. The country’s economic troubles are attributed to its substantial debt levels, reaching nearly USD 125 billion owed to external creditors, with approximately one-third owed to China by 2023.
