Cash -starved Pakistan urges China to roll over matured $2 billion loan

 Islamabad: Cash-strapped Pakistan has sought financial assistance of $2 billion from its close ally China for a year, according to a media report.

Caretaker Prime Minister Anwaarul Haq Kakar, in a letter, has requested his Chinese Premier Li Qiang to roll over the debt as soon as the deposit time for the loan from China is completed on March 23.

In his letter, Kakar expressed gratitude to China for its financial assistance to Pakistan during its economic crisis as the cash-strapped country has secured a safe deposit of a total of $4 billion in loans from China, reducing the country’s mounting pressure on external debt payments and stabilising its foreign exchange reserves, The Express Tribune newspaper reported.

Earlier this month, the UAE rolled over Pakistan’s maturing loan of $2 billion.

Apart from the UAE, Saudi Arabia has deposited $5 billion with the State Bank of Pakistan.

Following the loan rollover by the UAE, the interim government requested the International Monetary Fund (IMF) to dispatch a new mission this month for talks for the last loan tranche of $1.2 billion.

The IMF’s next mission is critical for not only securing the last loan tranche but also for beginning negotiations for a new long-term programme.

While speaking to a private TV news channel recently, former finance minister Ishaq Dar said in case his party – the Pakistan Muslim League-Nawaz (PML-N) – won the elections and formed the government, the decision about the new IMF programme would be made at the earliest.

Dar, the four-time finance minister of the country, added that in case his party decided not to enter the IMF programme, it would immediately start implementing the belt-tightening measures.

The IMF has made new adjustments in its fresh staff-level report about the available financing to Pakistan.

The Washington-based lender has increased the projection of budget support loans to $3 billion but cut the project financing to $3.7 billion for this fiscal year.

The overall external financing requirements have been reduced to a little under $25 billion with minor downward adjustments in the current account deficit projections, the report said.

The report suggested the global lender had made a minor adjustment of $575 million in its current account deficit projection in comparison with July’s estimates.

The IMF has now projected the deficit at $ 5.7 billion or 1.6 per cent of the GDP – an estimate that appeared on the higher end.

Pakistan is in economic ruin and awaiting a monumental financial default without long overdue structural reforms sought by global creditors such as the IMF and the World Bank, along with bilateral partners like China and the UAE.

The primary reason behind Pakistan’s economic woes is its staggering debt levels, which, as of 2023, amount to nearly $125 billion owed to external creditors, with approximately one-third to China.