ISLAMABAD: China helped Pakistan stave off a currency crisis by providing over $1.2 billion in loans during the past one year, the Financial Times claimed in a report on Tuesday.
According to the publication’s sources, state-backed Chinese banks have twice come to Pakistan’s rescue of Pakistan with $900m in 2016 and $300m in 2017’s first quarter.
Pakistan’s stocks of foreign currency remained saw volatile activity due to rising imports and a parallel fall in exports and remittances in the recent months.
The financial help extended from Pakistan’s close neighbour is indicative of increasingly close ties between the two countries at a time when the relationship between Pakistan and the US remains strained.
“Beijing is preparing to invest at least $52bn in Pakistan to build a highway, energy pipelines, power generation facilities and industrial parks from the western port of Gwadar on the Gulf to the Chinese border to the north,” the Financial Times reported.
However, despite its expected advantages to Pakistan, the China-Pakistan Economic Corridor (CPEC) infrastructure project is set to further deplete the foreign currency stocks that are required to pay contractors and suppliers.
As per the State Bank of Pakistan (SBP), Pakistan’s net reserves at the end of February were down to $17.1bn from $18.9bn at the end of October, and a peak of $25bn several years ago. This compelled Pakistan to seek emergency debt from external sources to repay older foreign currency loans.
Of the $1.2bn loan from China, $600m came from the government-run China Development Bank and $600m from the state-owned Industrial and Commercial Bank of China, the only mainland bank with a branch in Pakistan, the publication claimed.
“China keeps a very close eye on our economic trends and they’re happy to come to our help wherever needed,” a Pakistani official told the Financial Times.
Pakistan cleared the IMF debt incurred in 2013 last year. The repayment led policymakers in Islamabad and abroad to express optimism about prospects for economic stability.
Christine Lagarde, the head of the IMF, called it a “moment of opportunity” for the country.