Pak PM asks Chinese PM to refinance loan as economy remains in slump

Amid a weakening economy, Pakistani Prime Minister Imran Khan has asked Chinese Premier Li Keqiang to further refinance a RMB 15 billion loan that was extended to the country three years ago for a new term. three years under existing conditions, local vernacular media reported.

Loan refinancing refers to the process of taking out a new loan in order to pay off one or more existing loans.

The three-year loan had been extended on March 25, 2019 by a consortium of Chinese banks, including China Development Bank, Bank of China and Industrial & Commercial Bank of China, to finance trade between the two countries, to finance projects under the China-Pakistan Economic Corridor (CPEC), as well as other targeted projects, according to reports.

The previous loan was granted at a six-month interest rate at the Shanghai Interbank Offered Rate (SHIBOR) plus a margin of 2.50% for a period of three years maturing on March 25, 2022.

Pakistan faced severe liquidity problems and requested debt restructuring and deferrals from international donors.

China is trapping Pakistan in the Belt of Road Initiative (BRI) debt trap with high interest rates, rigid repayment terms and a lack of transparency.

According to a study by the International Monetary Fund, Pakistan’s external debt soared to $90.12 billion in April 2021, with Islamabad owing China $24.7 billion, more than 27% of Pakistan’s debt burden .

According to the IMF, the burden of hidden and sovereign debts will be a major cause of concern for Pakistan in the coming days as Pakistan’s assets will be tied to the Chinese economy.

Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party, when in opposition, questioned the terms and conditions of CPEC projects and the lack of transparency surrounding them.

However, Pakistan today has no way out but to toe the Chinese line, as evidenced by the way Pakistani President Imran Khan, during his visit to Beijing during the Winter Olympics, endorsed China’s crimes in Xinxiang, Tibet, Taiwan and the South China Sea.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times stemming from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on relevant topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor

Dorothy H. Lewis