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Pakistan owes China more Cash than it owes the IMF

Pakistan should refund China over twice the amount it owes the International Monetary Fund at another 3 decades, as loans racked-up to improve foreign exchange reserves and bridge a funding gap become expected.

The South Asian country owes $6.7 billion in commercial loans to China within the three years during June 2022, according to the IMF, this year approved a new plan to bail out Pakistan out of a catastrophe. Islamabad should cover the multilateral lender $2.8 billion in the same period.

Nonetheless, the cash was sufficient to only partially bridge a funding gap, forcing the South Asian country to knock the IMF’s doors.

“The borrowing picked up following the Belt and Road began,” said Hafiz Faizan Ahmed, head of research at Karachi-based Optimus Capital Management Pvt.”A majority of this Chinese lending occurred about two decades back when dollar reserves were dwindling, so the government maintained borrowing and borrowing”

A report this past year by the middle for Global Development recorded Pakistan one of eight countries that confront potential debt-sustainability issues due to the belt-road program.

“In a sense, it has gone wrong for Pakistan,” stated Burzine Waghmar, a part of the Centre for the Research of Pakistan at SOAS University of London. “Enthusiastically taking Chinese cash, they seemed in the short-term prices for shoring through the monetary catastrophe, without recognizing its moderate – and long-term consequence, and also the Chinese leverage over Pakistan. Plus it’s come to be accomplished.”