It appears that Pakistan is eyeing a $3 billion loan from China. A report by the Express Tribune claims that Prime Minister Imran Khan will seek a $3 billion loan when he will visit China next week for the Winter Olympics.
According to the report, Pakistan wants a loan from China to stabilize its dwindling foreign exchange reserves. It also seeks an investment bonanza in half a dozen sectors. PM Khan will request Chinese support in areas of finance, trade and investment, reported the publication citing government sources.
“A senior finance ministry official said the government was considering requesting China to approve another loan to the tune of $3 billion in China’s State Administration of Foreign Exchange, known as SAFE deposits,” the report notes.
Read more: China’s debt trap diplomacy: Is Pakistan a victim in CPEC?
Beijing already placed around $11 billion with Islamabad in the shape of commercial loans and foreign exchange reserves support initiatives, including $ 4 billion in SAFE deposits. The Chinese money is part of Pakistan’s current official foreign exchange reserves recorded at $16.1 billion, the article notes.
Shahbaz Rana- selected PM IK will be going to attend Winter Olympics in China with begging bowl for $3bn loans. China has already given $11 bn in FOREX support to Pak#Pakistan #jagokashmir pic.twitter.com/3uvet71xIX
— Shehnaaz Nasreen (@Fathimanaazmi) January 30, 2022
Furthermore, China is notorious for its alleged “debt-trap policy” where it lures poor countries into high-interest loan deals. To clarify, in the last fiscal year, Pakistan paid over Rs26 billion in interest cost to China only for using a $4.5 billion Chinese trade finance facility to repay the maturing debt.
Read more: China’s debt trap diplomacy: A hoax?
Pakistan’s soaring debts
According to various reports, Pakistan’s foreign loans jumped to $9.43 billion in the first half of (July-December) of fiscal year 2021-22. Additionally, the amount of loans increased after it received a $3 billion loan from Saudi Arabia last year. Saudi Arabia deposited the amount for one year under a support package at a 4 percent interest rate.
As a result, Pakistan recorded the overall amount of foreign borrowing at $9.432 billion in July to December period. This is in stark contrast to $5.67 billion in the corresponding period of the previous year.
Furthermore, Pakistan received a $1.062 billion loan from the Asian Development Bank. The World Bank also disbursed $965.73 million.
Read more: ADB endorses a 5-year partnership strategy for Pakistan