The Pakistani government is seeking a rollover of a $2 billion loan from China, as the term for safe deposit is expiring next month. According to a report by ARY News on Friday (Jan 26), caretaker Prime Minister Anwaar-ul-Haq Kakar wrote to Beijing, requesting for the loan. Citing sources, the report said that Pakistan formally requested China to roll over its loan, which is expiring on March 23, on the same terms and conditions.
The sources said that Pakistan’s finance ministry is in contact with the Chinese officials for a timely loan rollover. PM Kakar’s letter also appreciated Beijing’s assistance to Islamabad in easing the burden of foreign payments.
The loan from China comes days after the United Arab Emirates (UAE) rolled over $2 billion for one year to Pakistan, ARY News reported.
Pakistan is going through an economic crisis and will hold its parliamentary election next month.
Last week, Reza Baqir, the former governor of the State Bank of Pakistan said that the International Monetary Fund (IMF) was facing tough choices on how to deal with Pakistan after the election and how to assess the country’s debt situation.
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In July 2023, Pakistan secured a $3 billion loan programme with the IMF in July that helped pull the country back from the brink of a sovereign debt default. However, the programme whihc is a nine-month standby arrangement is set to expire this spring.
Speaking to news agency Reuters on Jan 18, Baqir, head of sovereign advisory services at Alvarez & Marsal, said, “The IMF will have to decide whether to pull the plug on Pakistan or not, and by that I mean it will have to decide about its assessment of debt sustainability.”
“That’s almost like having it both ways,” Baqir said, adding, that investors would be watching whether the IMF would continue to label the debt as sustainable or whether it would offer its support on a debt restructuring as part of a new programme should Pakistan’s authorities chose to go down that route.
Pakistan would also be a potential candidate for a “debt-for-nature”-style debt swap, he added pointing to the deadly 2022 floods.
(With inputs from agencies)