Pakistan continues to rely on China, despite IMF loans

According to a report by Pakistani media, the Sout-Asian country is set to address a dozen conditions in six months to meet the  $6 billion International Monetary Fund (IMF) programme as the debt-ridden country continues to rely heavily on China, for additional support.

IMF on Thursday released its staff country report of the $6 billion programme, showing that Pakistan's external financing needs are still largely met by China, reports the Asian News International citing the Express Tribune.

The report by Express Tribune also said that Pakistan's economic endurance still hinges upon an $11 billion continued Chinese lifeline.

According to the IMF, Pakistan's gross external financing needs - the funds that it needs to pay off foreign loans and finance its imports - amount to $27 billion over the next 12 months.

The Pakistani daily said these financing needs will be met by support from China's $10.8 billion, the UAE's $2 billion, the World Bank's $2.8 billion, the G-20's $1.8 billion initiative, the Asian Development Bank's $1.1 billion, and the Islamic Development Bank's $1 billion.

Pakistan authorities have remained engaged with external creditors to secure financing to meet the extended fund facility (EFF) program's debt sustainability objectives, according to the staff report.

"China has maintained its exposure by renewing (and augmenting) the CYN 30 billion (about $4.6 billion) three-year bilateral currency swap (about $3 billion at the time of EFF approval), as well as by renewing the maturing commercial loans as part of the program financing assurance commitment," the IMF said in the report.

China has also provided an additional $1billion deposit in July 2020, raising the State Administration of Foreign Exchange (SAFE) deposits to $4billion, IMF report added.

According to the Asia Times, in recent years, Chinese loans have fueled a massive buildout of Pakistan's power generation, financing that has turned a perennial electricity shortfall into a now-massive capacity surplus that the highly indebted nation can increasingly ill-afford.

In those debt-rescheduling talks, Pakistani officials are also reportedly asking their Chinese counterparts to decelerate agreed plans to build even more power plants that would add to the overcapacity problem.

Official figures indicate that Pakistan's total debt servicing liability could surpass $14 billion by the end of the year.