Pakistan has once again turned to its all-weather ally China for help in averting a foreign currency crisis by borrowing USD 1 billion from Chinese banks in April on "good, competitive rates”, according to a media report on Wednesday, 23 May.
In an interview with The Financial Times, the State Bank of Pakistan Governor Tariq Bajwa confirmed the loans were made by Beijing-backed banks on good rates.
“The money strengthens the financial, political and military ties between the two countries,” the top Pakistani banker was quoted as saying by the newspaper.
"Chinese commercial banks are awash with liquidity," Bajwa said.
Pakistan's foreign exchange reserves have dropped from USD 18.1 billion in April last year to USD 10.8 billion in May 2018.
According to the article, Pakistani officials also hope that borrowing from Chinese banks will also save Pakistan from seeking help from the International Monetary Fund (IMF).
Since December 1988, Pakistan has had nine separate engagements with the IMF — three of them were double programmes. That means there have been 12 IMF programmes in Pakistan in the last 28 years. Only four of them – all initiated in the 2000s and 2010s – were completed successfully; all the rest were abandoned halfway in the 1990s, the report said.
Lending money to Pakistan also favours China, said FT quoting Pakistani officials, as it does not wish to disclose details of the loans that are part of the China-Pakistan Economic Cooperation (CPEC) project.
China is investing almost USD 60 billion on building infrastructure in Pakistan. However, Beijing is reluctant to reveal the sum it is lending to Islamabad as part of the CPEC project.
“The Chinese are not keen on western institutions learning the minute details of [financing of] CPEC projects,” an unnamed official in Islamabad was quoted as saying.
"An IMF programme will require Pakistan to disclose the financial terms to its officials,” the official said.
According to the FT report, prior to last month's loan of USD 1 billion, Pakistan had borrowed almost USD 1.2 billion from Chinese banks since April, 2017 and more loans might follow