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Chinese banks helped Pakistan with $1.2bn loans: report

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  • Post last modified:26/04/2017
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ISLAMABAD: According to a report by Financial Times, China ‘rescued’ Pakistan from currency crisis with $1.2bn loans.

The report says, “State-backed Chinese banks have twice come to the rescue of the nuclear-armed state with $900m in 2016 and $300m in the first three months of this year.”

China’s financial help also underlines an increasingly close relationship at a time of strains between Pakistan and the US, it adds.

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.

‘But despite its expected benefits, the China-Pakistan Economic Corridor (CPEC) infrastructure project is set to further deplete the foreign currency stocks, needed to pay contractors and suppliers, the newspaper quoted officials as saying.

Figures from the State Bank of Pakistan (SBP) show the country had $17.1bn of net reserves at the end of February, down from $18.9bn at the end of October and a peak of $25bn several years ago.

“This has forced the country to seek emergency loans from outside sources to repay older loans made in foreign currencies.”

The report added: “Of the $1.2bn from the Chinese institutions, $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. Policy banks such as CDB often act on behalf of the central bank”.

A senior official from the Sustainable Development Policy Institute in Islamabad, said: “Technically speaking we should have gone back to the IMF in January, but ministers are likely to try and wait until after the election [for parliament planned for 2018].”

“The IMF is a politically volatile issue in our country. If we go to the IMF to deal with our needs, that will send a very negative political signal and the opposition [parties] will use that against the government,” the person said.