Pakistan seeks lifeline with fresh China loans

ISLAMABAD — Pakistan expects to obtain fresh Chinese loans worth $1-2 billion to help it avert a balance of payments crisis, Pakistani government sources said, in another sign of Islamabad’s growing reliance on Beijing for financial support.

Lending to Pakistan by China and its banks is on track to hit $5 billion in the fiscal year ending in June, according to recent disclosures by officials and Pakistan finance ministry data.

The ramp up in China’s lending comes as the United States is cutting aid to Pakistan following a fracture in relations between the on- off allies. In February, Washington led efforts that saw Pakistan placed on a global terror financing watchlist, drawing anger in Islamabad amid fears it will hurt the economy.

The new Chinese loans that are being negotiated will help bolster Pakistan’s rapidly depleting foreign currency reserves, which tumbled to $10.3 billion last week from $16.4 billion in May 2017.

The talks come only weeks after a group of Chinese commercial banks lent $1 billion to Pakistan’s government in April.

The reserves decline and widening of Pakistan’s current account deficit have prompted many financial analysts to predict that after the general election, likely in July, Islamabad will need its second International Monetary Fund (IMF) bailout since 2013. The last IMF assistance package was worth $6.7 billion.

Beijing’s attempts to prop up Pakistan’s economy follow deepening political and military ties in the wake of China’s pledge to fund power and road infrastructure as part of the $57-billion ChinaPakistan Economic Corridor, a key cog in Beijing’s vast Belt and Road initiative.

“I think this month we will get that $ 1- 2 billion,” said a senior Pakistan government official, while a second official confirmed Islamabad was in “sensitive” talks with Beijing over extra funding for up to $2 billion. —