Pakistan Loan Update: Securing $2 Billion Lifeline Amidst Financial Strains

Is $2 Billion Enough? Exploring Pakistan’s Debt and Loan. Pakistan Loan Update: Securing $2 Billion Lifeline Amidst Financial Strains. 

Pakistan, facing financial strain, has reached out to China for a $2 billion loan, reports say. Caretaker Prime Minister Anwaarul Haq Kakar has penned a letter to Chinese Premier Li Qiang, seeking to extend the debt repayment deadline due on March 23.

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Kakar expressed gratitude for China’s previous financial aid, which helped ease Pakistan’s economic crisis. The country has already secured $4 billion in loans from China, lessening the pressure of external debt payments and stabilizing foreign reserves.

Earlier this month, the UAE extended Pakistan’s $2 billion loan. Additionally, Saudi Arabia has deposited $5 billion in the State Bank of Pakistan.

Following the UAE’s loan extension, Pakistan’s interim government has urged the International Monetary Fund (IMF) to send a new mission for talks on the final $1.2 billion loan tranche.

The upcoming IMF mission is crucial for securing the last tranche and initiating discussions for a new long-term program.

Former finance minister Ishaq Dar, speaking to a private TV channel, mentioned that if his party, Pakistan Muslim League-Nawaz (PML-N), wins the elections and forms the government, they will decide on the new IMF program promptly. Otherwise, if they opt out, they will implement austerity measures promptly.

The IMF has adjusted its financing projections for Pakistan. Budget support loans are now projected at $3 billion, while project financing stands at $3.7 billion for the fiscal year.

Overall, external financing requirements have decreased to just under $25 billion, with minor adjustments in current account deficit projections.

Pakistan’s economic challenges stem largely from its massive debt, which stood at nearly $125 billion in 2023, with about one-third owed to China. Structural reforms are needed to address these issues, as urged by global creditors like the IMF and bilateral partners such as China and the UAE.