China has actually provided Pakistan $1 billion to enhance the South Asian country’s plummeting foreign currency reserves, 2 sources in Pakistan’s finance ministry told Reuters, amid growing speculation of another International Monetary Fund bailout.
The current loan highlights Islamabad’s growing reliance on Chinese loans to buffer its foreign currency reserves, which plunged to $9.66 billion last week from $16.4 billion in May 2017.
The lending is the result of negotiations for loans worth $1-$2 billion that was first reported by Reuters in late May, the two sources told Reuters.
“Yes, it is with us,” said one finance ministry source, in reference to the Chinese money. The second source added that the “matter stands complete”.
The financing ministry representative did not react to a Reuters ask for comment.
With the current loan, China’s financing to Pakistan in this ending in June is set to breach $5 billion.
In the very first 10 months of the China provided Pakistan $1.5 billion in bilateral loans, inning accordance with a financing ministry document seen by Reuters. Throughout this duration Pakistan also received $2.9 billion in commercial bank loans primarily from Chinese banks, ministry officials told Reuters.
Beijing’s attempts to prop up Pakistan’s economy follow a conditioning of ties in the wake of China’s promise to money badly-needed power and roadway facilities as part of the $57 billion China-Pakistan Economic Corridor (CPEC), a crucial cog in Beijing’s huge Belt and Road effort.
However experts say China’s aid will not suffice and anticipate that after the July 25 national election the new administration will likely seek Pakistan’s second bailout since 2013, when it received a bundle worth $6.7 billion from the IMF.
“Looking at the current circumstance, it is most likely after the new government is available in that they will go to the IMF,” stated Suleman Maniya, head of research at regional brokerage house Shajar Capital.