ISLAMABAD: In a sigh of relief for debt-ridden Pakistan, China on Saturday helped Pakistan by delaying the $2 billion debt repayment period by one year.
The Ministry of Finance confirmed that Pakistan was due to pay the debt amount on March 24, however, China gave a much-needed fiscal breather to help out its ally.
Pakistan continues to face severe economic challenges including strict conditions set by International Monetary Fund (IMF) and pressure on its foreign exchange reserves.
Pakistan owes much of its debt to three major sources including multilateral and bilateral creditors as well as through international bonds.
Multilateral creditors are international financial institutions that provide loans to countries who face economic instability such as IMF, World Bank and Asian Development Bank.
While bilateral creditors include countries that provide financial assistance directly to another country. China currently is on the top of Pakistan’s external debt creditors.
Meanwhile, Pakistan continues to engage with IMF to secure the next loan tranche as the IMF’s team is currently in the country.
In 2024, Pakistan secured a $7 billion Extended Fund Facility (EFF) from the IMF to navigate its economy out of crisis. This loan from IMF has helped Pakistan stabilise its economy and control inflation but stringent conditions from IMF has increased the burden of taxation on the public.
In addition to this, Pakistan is reportedly also trying to secure a huge Rs1.25 trillion loan from national commercial banks to help reduce its power circular debt.
Federal Minister of Energy, Awais Leghari, talked with Reuters, saying: “The loan will be repaid over a period of 5 to 7 years. We’ve approached many banks, let’s see how many participate. It’s a commercial transaction and they have the choice of participating, however, we think there is liquidity in the system for it and banks have the appetite”
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