Beijing | China on Friday reportedly agreed to provide USD 6 billion in aid to Pakistan, which is going through a “low point”, to minimise the cash-strapped country’s dependence on an IMF bailout package as Prime Minister Imran Khan held talks with Chinese President Xi Jinping.
Khan, who is here on his maiden visit, met Xi in the Great Hall of People where the two leaders also held one-on-one meeting besides delegation-level talks, Pakistani media reports said. Pakistan is expected to receive USD 6 billion economic package from China during the visit, Geo TV quoted sources as saying. A loan of USD 1.5 billion is also expected to be offered, along with an additional package of USD three billion for the China-Pakistan Economic Corridor (CPEC), the report said. The loan and the investments were reportedly part of the USD 6 billion package. There is no official comment from Beijing yet on the report.
Pakistan’s government has “inherited a very difficult economic situation,” Khan told Xi. “Unfortunately our country is going through a low point at the moment with two very big deficits, a fiscal deficit and a current account deficit,” he said.
Xi assured Khan that China considers its relations with Pakistan a “diplomatic priority”. “China has always placed Pakistan as a diplomatic priority for China, supported Pakistan’s safeguarding of national independence, sovereignty, and territorial integrity, and supported the new Pakistani government’s smooth running of the government and advancement of national construction,” the Chinese President said. China’s expected assistance is the second USD 6 billion package which Khan has managed to obtain in the last few weeks as Pakistan reeled under severe financial crisis.
During his visit to Saudi Arabia last month, Riyadh committed USD 6 billion funding which included USD 3 billion deferred payment for oil imports. Finance Minister Asad Umar, who is accompanying Khan, earlier told media in Islamabad that Pakistan’s strategy was to seek loans from multiple sources instead of asking the International Monetary Fund (IMF) alone to plug the entire gap in the country’s financing needs.
He said Pakistan faced a deficit of USD 27 billion which included USD 9 billion debt repayment this year. “After taking monetary and fiscal measures, in my opinion, our financing gap for this year will be around USD 12 billion,” he said.
According to a report in the Hong Kong-based South China Morning Post on Friday, Pakistan borrowed USD 6 billion from China last year to increase its dwindling foreign reserves. Pakistan has already approached the IMF for a bailout package which it apprehends will come with stringent conditions of austerity besides scrutiny of USD 60 billion China-Pakistan Economic Corridor (CPEC) projects whose terms till now remained confidential.
US Secretary of State Mike Pompeo has expressed opposition to using IMF money to repay Chinese loans. An IMF delegation is due to visit China next week and the Khan government wants to minimise the bailout package it seeks from the international lender.
“Khan has posited that Chinese and Saudi financial assistance will reduce the amount Pakistan needs to borrow from the IMF, mitigating Pakistan’s susceptibility to the US demands that its CPEC debt be transparent. “China wants to avoid such transparency because exposing the terms of the CPEC project agreements could validate the US criticism of the Belt and Road Initiative (BRI) as a debt trap for emerging economies,” the Post report said.
Khan is accompanied by Foreign Minister Shah Mehmood Qureshi, Finance Minister Umar, Advisor on Commerce and Trade Abdul Razzak Dawood, Railways Minister Sheikh Rasheed among others. He would hold talks with Chinese Premier Li Keqiang on Saturday after which both the countries would sign several agreements.
His visit here was regarded as significant as it is taking place amid critical remarks made by some ministers in Khan’s Cabinet on the CPEC which had caused consternation among Chinese leaders considering the “all-weather” relations.
While Commerce Minister Dawood told the Financial Times that some of the CPEC agreements were unfair to Pakistani companies and should be put on hold for a year, Railways Minister Rasheed said that Pakistan wants to cut the size of the USD 8 billion Karachi-Peshawar rail line, the biggest project of the CPEC, by USD 2 billion. The statements evoked serious concerns in China as the CPEC is the flagship project of President Xi’s pet multi-billion BRI.
The CPEC has also become a major irritant in India-China relations with New Delhi voicing its opposition to the infrastructure project as it traverses through Pakistan-occupied Kashmir (PoK).
China also agreed to address his concern that the CPEC projects were mainly benefitting the dominant Punjab region and the new projects will focus on the western region of Balochistan and Khyber-Pakhtunkhwa. From Beijing’s point of view, Pakistan’s criticism of the project was a shocker, especially after China’s takeover of Sri Lanka’s Hambantota port on a 99-year lease as a debt swap.
In an interview to the Chinese state-run media ahead of his visit, Khan said the CPEC has given Pakistan a great opportunity to bring in foreign investment and to get out of the difficult economic situation it is facing. He said Pakistan could learn more from China than any other developed country to tackle its various socio-economic challenges, including poverty and corruption.
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