China rolls over $2 billion debt amid economic challenges. In a significant development, China has extended a lifeline to Pakistan by agreeing to roll over a $2 billion debt, according to sources within the Ministry of Finance.
Pakistan, facing economic challenges exacerbated by the COVID-19 pandemic, had previously secured a $2 billion loan from China at an interest rate of 7.1%.
The loan, which was due to mature in the upcoming week of March, posed a significant burden on Pakistan’s already strained financial resources.
Sources reveal that in the last fiscal year, Pakistan disbursed Rs26.6 billion in repayments to China, Saudi Arabia, and the United Arab Emirates (UAE) against the $9 billion in deposits these countries had placed with the State Bank of Pakistan.
The decision to roll over the debt comes as a timely relief for Pakistan, which has been grappling with dwindling foreign reserves currently standing at $8 billion.
This move is expected to provide much-needed breathing room for the State Bank of Pakistan (SBP) as it navigates through economic challenges.
The initiative to extend the debt repayment period was spearheaded by caretaker Prime Minister Anwaar-ul-Haq Kakar, who recently penned a letter to his Chinese counterpart, Li Qiang, seeking the extension of the $2 billion loan for a year.
Kakar expressed profound gratitude to the Chinese government for their unwavering support during Pakistan’s economic adversity.
A substantial portion of the $4 billion in loans received from China has been earmarked as a secure deposit, alleviating some of Pakistan’s external payment obligations.
This is not the first instance of China stepping in to assist Pakistan during times of financial strain.
Last May, China played a pivotal role in helping Pakistan secure critical pending loans from the International Monetary Fund (IMF) by rolling over more than $2 billion in debt.
This timely intervention averted immediate default for Pakistan, providing much-needed relief.
China’s steadfast commitment to supporting Pakistan’s economic stability has been underscored by earlier instances of loan rollovers and statements of support from high-ranking Chinese officials.
Foreign Minister Qin Gang reiterated China’s pledge of financial assistance during a visit to Pakistan in May of the preceding year.
As China rolls over $2 billion debt amid economic challenges, the decision to extend the debt repayment period reflects the strong bilateral ties between China and Pakistan, with China once again demonstrating its solidarity and support for Pakistan’s economic well-being during challenging times.
