China again extended the deadline for paying a billion dollar loan to Pakistan, in a new step to support the stalled Pakistani economy, amid Islamabad’s endeavor to obtain additional support from friendly countries to revive its fragile economy.
Kharram Shahzad, Advisor to the Pakistani Finance Minister, said in statements to Bloomberg on Sunday that Beijing agreed to extend the loan for another year as the payment date approaches, giving Islamabad a financial outlet in the face of its growing economic crises.
Huge debts of the belt and the road
China has built huge infrastructure and energy projects in Pakistan as part of President Xi Jinping’s vision of the Belt and Road Initiative, which led to the accumulation of huge debts on Islamabad.
However, Beijing confirms that it has not exerted any pressure on Pakistan to pay loans, but rather has provided several extensions for payment dates and facilities within the deadlines.
The last extension comes at a sensitive time, as Pakistan is subject to the first review of a $ 7 billion loan program from the International Monetary Fund. This review is a major indication of investors on the extent of progress in economic reforms.
The cash flows from international lenders and friendly countries, such as China, have contributed to Pakistan to avoid the risk of paying off in 2023, which made this financial aid a major factor in its economic stability.
Extension reversions
After announcing the extension of the Chinese loan, the Pakistani international bonds recorded a slight improvement, as the securities due in 2026 increased to 95.8 cents per dollar, while the Pakistani Stock Exchange index increased by 0.3% by 11:44 am local time.
Despite this financial assistance, Pakistan is still facing major economic challenges, according to Bloomberg, with high levels of inflation and unemployment, the weak value of the local currency, and the government relies on a mixture of financial aid and economic reforms to avoid a deeper financial crisis.
