China to lend $2bn to Pakistan to shore up rupee
ISLAMABAD (92 News) – China has pledged to lend at least $2bn to Pakistan to shore up its foreign exchange reserves and prevent further devaluations of the rupee against the dollar, the British Newspaper Financial Times reported.
According to a report of the Financial Times, the financial support – which is not being publicly announced by China – comes as the government of Prime Minister Imran Khan is struggling with a weakening fiscal position, high debt repayments and dwindling reserves.
“China’s promise to Pakistan is an indication of their commitment to help us avoid a crisis. If the rupee falls sharply and we need to prevent its slide, we can turn to China,” the report stated.
The promised financial support signals deepening economic ties between China and Pakistan even as Islamabad is negotiating with the IMF for a potential $7bn to $8bn loan.
Pakistan’s finance ministry and the IMF are due to resume discussions later this month on details of the package, which is expected to come with tough conditions, such as slimming down the country’s bloated state-owned enterprises through job cuts.
The rupee has lost more than a fifth of its value against the dollar since late 2017 and Fitch has cut Pakistan’s debt rating deeper into junk territory last month. Pakistan’s foreign reserves, at $7.3bn, have dropped to about one and a half months of import cover, regarded as a critically low level, said economists.
After decades of close military co-operation, Beijing has been stepping up financial support for Pakistan, with Chinese state-backed banks lending $4bn to Islamabad in the year ending June 2017.
Earlier, the United Arab Emirates (UAE) announced its intention to deposit US$3 billion in the State Bank of Pakistan to support Pakistan’s financial and monetary policy.
The UAE will be giving Pakistan a $3 billion bailout package in the next few days. The package is to support the financial and monetary policy of Pakistan.
Saudi Arabia announced a US$12 package for Pakistan in three years. Prime Minister Imran Khan visited Saudi Arabia on the invitation of the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz to participate in the Future Investment Initiative (FII) Conference on October 22-23.
During the visit, the prime minister had detailed bilateral discussions with King Salman bin Abdul Aziz and Crown Prince Muhammad bin Salman.