
Cash-strapped Pakistan is facing economic challenges and has requested financial aid from its ally China. Caretaker Prime Minister Anwaarul Haq Kakar has written to Chinese Premier Li Qiang seeking a $2 billion loan extension.
Chinese Support:
Expressing gratitude for China’s ongoing financial support, Kakar highlighted that Pakistan has received a total of $4 billion in loans from China. This assistance has helped ease pressure on external debt payments and stabilize foreign exchange reserves.
UAE and Saudi Arabia’s Contributions:
Earlier, the UAE rolled over a $2 billion loan, and Saudi Arabia has deposited $5 billion with the State Bank of Pakistan. The interim government has also approached the International Monetary Fund (IMF) for talks on the last loan tranche of $1.2 billion.
IMF’s Role:
The IMF’s upcoming mission is crucial for securing the last loan tranche and initiating negotiations for a new long-term program. Former finance minister Ishaq Dar mentioned that decisions about the IMF program would be made promptly if his party, the Pakistan Muslim League-Nawaz (PML-N), won the elections.
IMF Adjustments:
The IMF has adjusted its projections, increasing budget support loans to $3 billion but cutting project financing to $3.7 billion for the fiscal year. Overall external financing requirements have been reduced to just under $25 billion, with minor adjustments in current account deficit projections.
Economic Challenges:
Pakistan faces economic difficulties, primarily due to staggering debt levels, reaching nearly $125 billion owed to external creditors as of 2023, with about one-third owed to China.
Conclusion:
Pakistan is grappling with economic challenges and seeks financial assistance from various sources, including China, the UAE, and the IMF. The country’s economic stability hinges on effective debt management and structural reforms.