China assists Pakistan by providing further $700mn to shore up FX reserves


The South Asian nation's finance minister announced that Pakistan will this week receive a fresh $700 million loan from China to support its foreign exchange reserves.

The credit line was provided by the government-owned China Development Bank at the same time that Pakistan and the International Monetary Fund (IMF) were negotiating a deal to release funds from a $6.5 billion bailout that was vital to preventing an economic catastrophe.

"This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves," Finance minister Ishaq Dar said on Twitter.

According to a representative of the finance ministry, China has already provided Pakistan with additional facilities in addition to the loan.

Pakistan is experiencing its worst economic crisis in decades, and its foreign exchange reserves, which are at their lowest level in ten years, are only sufficient to cover imports that are essential for less than three weeks. In the meantime, the IMF's demands for fiscal reforms are causing inflation to reach record levels.

The United States, a longtime ally, warned this week that it was concerned about this debt and was speaking to Islamabad about the "perils" of a tighter relationship with Beijing. China is already Pakistan's biggest creditor.

According to a September IMF study, China and Chinese commercial banks held nearly 30% of Pakistan's estimated $100 billion overall external debt.

The China-Pakistan Economic Corridor, a component of Beijing's Belt and Road Initiative, is where a large portion of that debt originated.

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