China gives Pakistan $1b to boost depleting foreign reserves amid IMF loan uncertainty

The injection will contribute to Pakistan’s reserves, which had dwindled to approximately $3.9 billion (£3 billion) in recent weeks.

• Shubham
• 17 June, 2023

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By: Shubham Ghosh

CHINA HAS granted Pakistan $1 billion (£780 million) to bolster its dwindling foreign reserves and address the uncertainty surrounding a stalled International Monetary Fund (IMF) loan. The State Bank of Pakistan confirmed the receipt of the funds from China, though specific details were not disclosed. The injection will contribute to Pakistan’s reserves, which had dwindled to approximately $3.9 billion (£3 billion) in recent weeks.

Pakistan’s economic situation teeters on the brink of default as it faces pressure from the IMF to fulfil demands, which Islamabad insists it has already met, in order to receive the remaining $2.5 billion (£1.9 billion) from a $6.5 billion (£5 billion) bailout package agreed upon in 2019. Although the entire amount is unlikely to be disbursed as the program concludes on June 30, Pakistan is pushing for a symbolic gesture of endorsement from the IMF in the form of a $1.1 billion (£858 million) tranche.

Without IMF support, Pakistan is unable to secure multilateral or bilateral loans. Only China has consistently provided assistance, while Saudi Arabia and the UAE have offered selective support. Finance minister Ishaq Dar criticided the IMF, alleging that geopolitical motives influenced its loan package, with global institutions aiming to push Pakistan into default as seen with Sri Lanka before entering negotiations.

Pakistan is actively exploring alternatives to sustain its economy in the absence of IMF support. One policy option announced by Dar involves timely repayment of multilateral loans while negotiating the rollover of bilateral loans with individual countries. Pakistan hopes that China will roll over $4 billion (£3.1 billion) of bilateral loans, and it plans to address approximately $9 billion (£7 billion) in loans from various nations during the next fiscal year, starting from July 1.

Additionally, Pakistan seeks to refinance a $300 million (£234 million) loan from the China Development Bank, which matures on June 30.

(Wit agency inputs)