China Gifts Pakistan with a $2.2 Billion Loan
On Monday, China gifted its long-time ally, Pakistan, with a loan of $2.2 billion. China’s loan will help Pakistan avoid defaulting on its debt payments.
A Tweet posted on Monday by Pakistan’s central bank stated: “The State Bank of Pakistan has received RMB 15 billion value equivalent to USD 2.2 billion as proceeds of the loan obtains by the government of Pakistan from China.”
China’s loan brings the total amount of financial assistance Pakistan has received from friendly external powers this fiscal year to $9.1 billion. China has contributed $4.1 billion, while Saudi Arabia and the United Arab Emirates (UAE) have given $3 billion and $2 billion respectively. Pakistan’s foreign exchange reserves also now stand at $10.67 billion.
The increase in aid from China to Pakistan comes after Chinese Premier Li Keqiang promised financial assistance to Pakistan during Pakistani Prime Minister, Imran Khan’s, visit to China earlier this year.
Shortly after the visit, Lu Kang, a spokesman of China’s foreign ministry stated: “‘The Chinese side has offered and will continue to offer its best through assistance, trade, investment, and all-around practical cooperation to support and boost Pakistan’s economic and social development.”
China has maintained a vested interest in ensuring Pakistan’s financial stability for years. In 2015, Chinese President Xi Jinping visited Islamabad to formally announce the launch of CPEC, the China-Pakistan Economic Corridor. According to the Institute of Strategic Studies in Islamabad, CPEC began as an agreement to connect Pakistan and China via roads and railways but has served a prominent role in fleshing out the general economic partnership between the two countries.
Before China’s loan, Pakistan had been in a particularly tough position in regards to financing its debts. The country had been preparing to pay $1 billion to a Eurobond in April, in addition to making other external debt payments. This encouraged Chinese intervention in Pakistan’s economy, and only increases the potential for increased Chinese investment into Pakistan’s infrastructure and Pakistani companies.
Still, a top concern for Pakistan revolves around financing its foreign debt payments, and in order to do that, Prime Minister Imran Khan must continue to be wary of accepting foreign loans, even from nations such as China that claim to simply be lending a helping hand in Pakistan’s time of need.