A recent report by the Financial Times claims that China has assisted Pakistan’s financial situation with loans worth $1.2 billion during the last year.
The Chinese support to the fragile economy, in the form of loans, has been offered by the state-backed banks twice. During 2016, an influx of Chinese loans worth $900 million, and later $300 million in the first three months of 2017 are a testament to this. Commenting on the geopolitical importance of the loan, the report said China’s financial help also underlines an increasingly close relationship at a time of strains between Pakistan and the US relations.
Figures from the State Bank of Pakistan (SBP) show the country had $17.1 billion of net reserves at the end of February 2017, down from $18.9 billion at the end of October 2016.
This manifests the extremely fragile and reliant condition of the Pakistan’s stock of foreign exchange, which has considerably seen a decline attributed to the decrease in remittances and increase in imports over the past few years.
A Pakistani official has been reported to say:
“China keeps a very close eye on our economic trends and they’re happy to come to our help wherever needed.”
This in no way means that the storm has passed. Experts warn that Pakistan might have to ask for further support from institutions such as the International Monetary Fund, which it had also sought to in 2013.
Beijing is ready to invest about $52 billion in Pakistan for the building of major infrastructure falling under the CPEC. However, despite its benefits, the economic corridor is expected to drain the foreign reserves of Pakistan a lot more. This has forced Pakistan to take loans to pay the suppliers and contractors working on the project.
The financial help stretched from Pakistan’s close neighbor is revealing the increasingly close ties between the two countries at a time when the relationship between Pakistan and the US remains edgy. Christine Lagarde, the head of the IMF, has called it a “moment of opportunity” for the country.