Pakistan has officially asked China to extend the repayment of its $3.4 billion debt by two years. The International Monetary Fund (IMF) programme has identified a $5 billion external funding need, and this step is an attempt to help fill that gap. The request was conveyed by Deputy Prime Minister Ishaq Dar during his recent visit to Beijing.
The Export-Import (Exim) Bank of China is the source of the requested loans, and Chinese authorities have taken a favourable view of the matter. The offered rescheduling incorporates both direct and guaranteed debt for state-owned firms, with maturities spanning from October 2024 to September 2027.
There was the same deal last year for $2.4 billion, so this is the second request of its kind in the previous five months. The proposed arrangement calls for Pakistan to prolong principal repayments while maintaining interest payments.
Pakistan relies significantly on China’s aid, and rescheduling the loan is considered an essential step in achieving financial stability. Additionally, the deal would help the government move forward with its current $7 billion IMF programme. Pakistan, however, has borrowed $300 million and received an oil facility from Saudi Arabia worth $1.2 billion to make up for its budget gap.
Financial aid is relieving some of the strain, but Fitch, a worldwide rating firm, has pointed out problems, such as high debt maturities and dependence on outside lenders. To increase the existing trade financing cap, Pakistan recently asked China for a $1.4 billion loan.
Pakistan relies on friendly nations and lenders to stabilise its economy and fund its debt refinancing.
