Pakistan seeking another bailout from China

Pakistani Rupee

China has recently provided $1.6 billion of credit line to Pakistani in order to boost its foreign currency reserves. Now the country seeks another loan from China.

According to the government officials, Pakistan has borrowed almost $4 billion from China during the last financial year FY2017-18 ended on June 2018 in order to protect its depleting foreign reserves and avoid assistance from IMF.

However, a recent report by ‘Fitch Ratings’ claim that Pakistan’s economy is at risk, in the long run, Chinese borrowing help Pakistan’s economy for short-term but Pakistan should also consider IMF Programme that is more viable for the country.

Since ‘Fitch Ratings’ report has acknowledged the favorable results borrowing from China, the company report is also compelling Pakistan to return to IMF instead. This is not just one report from an international firm and media on Pakistan’s economy and its future strategy, foreign media is full of such stories where Pakistan is being forced to return to IMF programme.

Officials in Islamabad sent warning signals to Chinese authorities about the concerns over China-Pakistan Economic Corridor (CPEC) initiative, the officials said if funding is stopped from China the CPEC would be threatened and Pakistan would be forced to return to IMF, if this happens Pakistan has to disclose all the details of the project and how it’s being funded, it could also lead to closure of some infrastructure projects that are critical.

Officials told Financial Times, we had detailed discussion with Chinese authorities over the concerns, if Pakistan is locked in IMF Programme, the country has to disclose all the CPEC terms and funding agreements to IMF which could lead to drastic measures.

Pakistan’s foreign reserves are declining for the last few years, China had recently provided Pakistan $1.6 billion to cope with the situation, State Bank of Pakistan SBP has also released a report in which improvement was seen in foreign currency reserves after this bailout.

Pakistan’s increasing imports, depreciation of Rupee, and debt servicing are making it even worst, during 2019 the size of external repayments would reach $12.7 billion as compared to $7.7 billion this year.

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