ISLAMABAD -UNS – China has pledged to lend at least US$2 billion to Pakistan to shore up its foreign exchange reserves and prevent further devaluations of the rupee against the dollar, Financial Times reported.
According to a report published in the Financial Times, the financial support, which is not being publicly announced by China, comes as the government of Prime Minister Imran Khan is struggling with a weakening fiscal position, high debt repayments and dwindling reserves.
“China’s promise to Pakistan is an indication of their commitment to help us avoid a crisis. If the rupee falls sharply and we need to prevent its slide, we can turn to China,” the tabloid added.
The promised financial support signals deepening economic ties between China and Pakistan even as Islamabad is negotiating with the IMF for a potential $7bn to $8bn loan.
Pakistan’s finance ministry and the IMF are due to resume discussions later this month on details of the package, which is expected to come with tough conditions, such as slimming down the country’s bloated state-owned enterprises through job cuts.
The rupee has lost more than a fifth of its value against the dollar since late 2017 and Fitch has cut Pakistan’s debt rating deeper into junk territory last month.
After decades of close military co-operation, Beijing has been stepping up financial support for Pakistan, with Chinese state-backed banks lending $4bn to Islamabad in the year ending June 2017.
China has committed to invest more than $60bn in infrastructure, energy, railway and road projects in Pakistan under the China-Pakistan Economic Corridor, a centrepiece of Chinese president Xi Jinping’s Belt and Road Initiative. The corridor is intended to link China’s western region with Pakistan’s newest deep seaport financed by Beijing at Gwadar near the Gulf.