China pledges financial aid to Pakistan amidst debt challenges

March 15, 2024 (MLN): China will help Pakistan overcome its foreign debt woes by extending financial assistance to the South Asian country, according to its consul general in Lahore as reported by Bloomberg.

Beijing has never pressured Islamabad to repay loans and it has recently rolled over $2 billion in debt as the payment date neared, China’s Counsel General Zhao Shiren said in an address to the business community in Faisalabad in Punjab province.

Zhao’s comments were carried in a statement released by the Faisalabad Chamber of Commerce and Industry.

China’s $2bn loan is equal to about a quarter of Pakistan’s central bank reserves that stand at around $7.9bn.

Zhao said the Chinese debt accounts for 13% of Pakistan’s total foreign debt. Data from the International Monetary Fund shows loans from China’s government are much higher at 23%.

Pakistan narrowly averted a debt default last summer by clinching a short-term loan from the IMF, which ends next month.

The IMF has classified the nation’s debt as “borderline manageable” while a local think tank has labeled it as unsustainable.

Pakistan’s external debt and liabilities have almost doubled to $125bn since 2011 and interest payments are at a record high, according to think tank Tabadlab.

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