(CTN News) – Pakistan signed a $2.3 billion loan agreement with China on Tuesday to boost its crisis-hit economy. The deal with a Chinese consortium of banks followed the depletion of foreign reserves and the free fall of the currency.
Taking out the loan will relieve the country’s cash-strapped economy and enable Islamabad to pay for imports.
Pakistan Finance Minister Miftah Ismail said the “inflow” would arrive in a few days. Ismail thanked the Chinese President Xi Jinping-led Beijing government for “facilitating the transaction.”
In a detailed account, he wrote: “The Chinese consortium of banks have signed the RMB 15 billion ($2.3 billion) loan agreement after it was signed by the Pakistani side yesterday.”
The State Bank of Pakistan’s (SBP) forex reserves also fell below $9 billion as of June 10. For weeks now, the reserves have remained well below the import cover level. The Dawn newspaper reports that Pakistan will need at least $37 billion to repay its debts and clear other obligations next year.
According to experts, the deal will only contribute to Pakistan’s reckless borrowing from China. According to the 2021-22 Economic Survey, China is Pakistan’s largest bilateral creditor with $14.5 billion in outstanding loans.
Three Chinese commercial banks and three state-owned banks owe Pakistan about $8.77 billion.
Chinese backing comes ahead of IMF bailout
As part of the deal, Islamabad looks forward to reviving its $6 billion IMF assistance package. Resuming the stalled aid will allow Pakistan to access $1 billion immediately, restoring its steadily declining forex reserves.
The deal is expected to be secured soon after months of inordinate delays, Dawn reported. Pakistan’s Prime Minister Shehbaz Sharif’s government needs the IMF to approve the deal by June 28 in order to implement it on July 1.
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