China has loaned USD 1.2 billion to its ‘all-weather ally’ Pakistan in recent months to stave off a currency crisis, according to a media report. According to the Financial Times of London, state-backed Chinese banks have twice come to Pakistan’s rescue with USD 900 million in 2016 and USD 300 million in the first quarter of 2017. Pakistan’s stocks of foreign currency remained saw volatile activity due to rising imports and a parallel fall in exports and remittances in the recent months.
China’s financial help also underlines an increasingly close relationship at a time of strains between Pakistan and the US, the paper said. The loans were given to Pakistan at a time when China is going ahead with the USD 52 billion China-Pakistan Economic Corridor (CPEC) project. Under the project, highways, energy pipelines, power generation facilities and industrial parks would be built from the western port of Gwadar on the Gulf to the Chinese border to the north.
You May Also Like To Watch This:
However, despite its expected advantages to Pakistan, the CPEC infrastructure project is set to further deplete the foreign currency stocks that are required to pay contractors and suppliers, the Times said. As per the State Bank of Pakistan (SBP), Pakistan’s net reserves at the end of February were down to USD 17.1 billion from USD 18.9 billion at the end of October, and a peak of USD 25 billion several years ago. This compelled Pakistan to seek emergency debt from external sources to repay older foreign currency loans.
Of the USD 1.2 billion loan from China, USD 600 million came from the China Development Bank and USD 600 million from the state-owned Industrial and Commercial Bank of China, the only mainland bank with a branch in Pakistan, the publication said. “China keeps a very close eye on our economic trends and they are happy to come to our help wherever needed,” a Pakistani official told the British newspaper.