China's $1 Billion Aid to Boost Pakistan's Foreign Reserves

Cash-strapped Pakistan, facing a critical shortage of foreign reserves, has received a financial boost of $1 billion from its close ally China. This assistance aims to support Pakistan's struggling economy amidst uncertainties about reviving a stalled loan from the International Monetary Fund (IMF). The State Bank of Pakistan (SBP) confirmed the receipt of the funds from China, but did not disclose further details.

This amount will help replenish Pakistan's foreign reserves, which had fallen to around $3.9 billion in recent weeks. Earlier, the country had repaid $1 billion to China against a due amount of $1.3 billion, with hopes of further repayments in the future.

Pakistan's economy is on the verge of default as the IMF is imposing stringent conditions for the release of the remaining $2.5 billion out of a $6.5 billion bailout package agreed upon in 2019. Although the entire amount is unlikely to be paid before the program ends on June 30, Pakistan is seeking a symbolic tranche of $1.1 billion from the IMF as an endorsement of its policies.

Without the support of the IMF, Pakistan is finding it challenging to secure multilateral or bilateral loans, except for assistance from China. While Saudi Arabia and the UAE have provided selective support, China remains steadfast in its commitment to help Pakistan.

The finance minister, Ishaq Dar, criticized the IMF, suggesting that geopolitics influenced their loan package. He claimed that global institutions wanted Pakistan to default, similar to Sri Lanka, before entering into negotiations. In the absence of IMF support, Pakistan is actively exploring options to keep its economy afloat. The government's policy includes timely repayment of multilateral loans while discussing the rollover of bilateral loans with individual countries.

Pakistan hopes to secure the rollover of $4 billion in bilateral loans with China and is also considering refinancing a $300 million loan from the China Development Bank, which matures on June 30. Additionally, Pakistan aims to negotiate the rollover of approximately $9 billion in loans with different nations in the next fiscal year, starting from July 1.