In a remarkable milestone amid Pakistan’s economic woes, China has agreed to roll over a $2 billion debt, providing a key lifeline to its partner.
According to sources familiar with the situation, China first wanted to raise interest rates on the debt.
However, following negotiations, an agreement was reached to keep the current terms. Pakistan, which was dealing with an increase in interest rates as a result of its policy of retaining foreign exchange reserves through deposits, welcomed this decision.
The debt, which matured during the week of Pakistan Day, March 23, provided a substantial challenge to the country’s already stressed finances.
Caretaker Prime Minister Anwaar-ul-Haq Kakar played a pivotal role in securing this agreement, formally requesting Chinese Premier Li Qiang to extend the loan term. In his letter, PM Kakar expressed gratitude for China’s continued financial support during Pakistan’s economic hardships. The rollover of this debt comes as part of China’s ongoing assistance to Pakistan. Last year, Beijing came to Pakistan’s aid amid difficulties in securing a critical loan from the International Monetary Fund (IMF). The Chinese government rolled over more than $2 billion in debt, helping Pakistan avoid immediate default. The rollover of this debt, along with other financial support from China, including safe deposits amounting to $4 billion, is expected to alleviate some of Pakistan’s external payments burden.
