Pakistan Seeks $3.4 Billion Debt Rescheduling from China

Pakistan’s Request for Debt Rescheduling

Pakistan has formally requested China to reschedule $3.4 billion in official and guaranteed debt for two years. This extension is crucial for Islamabad as it faces a $5 billion external financing gap identified by the International Monetary Fund (IMF) during the signing of a recent $7 billion bailout package. Much of this debt is owed to China’s Export-Import (Exim) Bank and involves both direct government loans and debt guaranteed by State-Owned Enterprises (SOEs).

This request marks the second time Pakistan has sought assistance from China to defer debt payments, following a similar $2.4 billion debt rollover from July 2023 to June 2025. While there has been no official response from the Chinese authorities, Islamabad remains hopeful for Beijing’s continued support, given China’s prior assistance in managing Pakistan’s financial needs.

Addressing the IMF’s External Financing Gap

The IMF has identified a $5 billion financing shortfall in Pakistan’s budget, with $2.5 billion needed in the current fiscal year. While Pakistan has arranged some funds to meet IMF requirements, delays in a few promised loans have widened the gap, intensifying Islamabad’s reliance on debt restructuring and fresh inflows.

The IMF has scheduled an unscheduled mission to Pakistan to assess recent economic developments and review performance under the bailout package. The mission’s early visit underlines concerns over Pakistan’s ability to meet IMF conditions.

China’s Role in Pakistan’s Financial Stability

China has played a significant role in stabilizing Pakistan’s economy, with a continuous rollover of $4 billion in cash deposits, $6.5 billion in commercial loans, and $4.3 billion in trade financing. In addition to this support, Pakistan is seeking an additional $1.4 billion loan and an expansion of the existing currency swap agreement with China from CNY 30 billion to CNY 40 billion.

Security Concerns and Future Cooperation

China has recently raised concerns about the security of its citizens and investments in Pakistan, an issue likely to influence future economic relations. While Pakistan has requested further relief in the form of energy debt rescheduling exceeding $16 billion, it has yet to secure a formal agreement.

As Pakistan navigates these financial challenges, assistance from China and timely restructuring will be critical to achieving financial stability and meeting IMF obligations.

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