ISLAMABAD: China has lent Pakistan $1 billion to boost the South Asiancountry’s plummeting foreign currency reserves, two sources in Pakistan’sfinance ministry told Reuters, amid growing speculation of anotherInternational Monetary Fund bailout.
The latest loan highlights Islamabad’s growing dependence on Chinese loansto buffer its foreign currency reserves, which plunged to $9.66bn last weekfrom $16.4bn in May 2017.
The lending is the outcome of negotiations for loans worth $1-$2bn that wasfirst reported by Reuters in late May, the two sources told Reuters.
“Yes, it is with us,” said one finance ministry source, in reference to theChinese money. The second source added that the “matter stands complete”.
The finance ministry spokesperson did not respond to a Reuters request forcomment.
With the latest loan, China’s lending to Pakistan in this fiscal yearending in June is set to breach $5bn.
In the first 10 months of the fiscal year China lent Pakistan $1.5bn inbilateral loans, according to a finance ministry document seen by Reuters.During this period Pakistan also received $2.9bn in commercial bank loansmostly from Chinese banks, ministry officials told Reuters.
Beijing’s attempts to prop up Pakistan’s economy follow a strengthening ofties in the wake of China’s pledge to fund badly-needed power and roadinfrastructure as part of the $57bn China-Pakistan Economic Corridor(CPEC), an important cog in Beijing’s vast Belt and Road initiative.
But analysts say China’s help will not be enough and predict that after theJuly 25 national election the new administration will likely seekPakistan’s second bailout since 2013, when it received a package worth$6.7bn from the IMF.
“Looking at the current scenario, it is likely after the new governmentcomes in that they will go to the IMF,” said Suleman Maniya, head ofresearch at local brokerage house Shajar Capital.