Skip to main content

Pakistan turns to China to avoid foreign currency crisis

© Bloomberg Farhan Bokhari in Islamabad and Kiran Stacey in New Delhi

MAY 23, 2018 17 Pakistan has again turned to China for help in avoiding a foreign currency crisis, deepening the two countries’ economic ties by borrowing $1bn from Chinese banks in April, Pakistan’s central bank governor has revealed. In an interview with the Financial Times, Tariq Bajwa confirmed the loans were made by Beijing-backed banks, at what he said were “good, competitive rates”. The money strengthens the financial, political and military ties between the two countries and underlines the increasingly assertive role Beijing is playing in south Asia and beyond.

With Pakistan’s foreign exchange reserves dwindling due to falling exports and rising imports, officials in Islamabad hope the cash will help Pakistan avoid having to go to the International Monetary Fund for another bailout, having done so 12 times previously since 1988. Pakistan had $10.8bn in foreign currency on May 11 — the most recent figures available — down from $18.1bn as of April 2016. Officials said China was happy to lend the money despite Pakistan’s fiscal crunch, in part because it does not want details made public about the loans it has made as part of the China-Pakistan Economic Corridor.

Recommended The Big Read Pakistan shuns US for Chinese high-tech weapons China is spending $60bn building up Pakistan’s infrastructure as part of its Belt and Road Initiative to create a network of trade routes around the world. However, Beijing has been reluctant to reveal details of the loans it is providing to Islamabad as part of that project. One civil servant in Islamabad said: “The Chinese are not keen on western institutions learning the minute details of [financing of] CPEC projects. An IMF programme will require Pakistan to disclose the financial terms to its officials.” The loans follow the $1.2bn that Chinese banks lent to Pakistan in the 12 months to April 2017, and officials said more was likely to follow. One senior adviser in Islamabad told the FT that the finance ministry had held informal discussions with Chinese banks to borrow at least $500m more before the end of the financial year ending in June 2018. 

“Borrowing from China has become an increasing feature of our external side,” the adviser said. Mr Bajwa added: “Chinese commercial banks are awash with liquidity.” But some economists warn the Chinese loans are merely a stopgap. Mushtaq Khan, a former central bank economist now running the Doctored Papers advisory group, said: “Pakistan’s policymakers are not doing enough to narrow the external deficit — instead they’re just financing the gap. “China factors importantly into this financing, but that doesn’t really solve our problem — it only postpones and exacerbates the issue.” With US President Donald Trump taking a hard line towards Pakistan, the country’s leaders have prioritised strengthening relations with China instead, which now provides everything from loans to power plants and weapons to its southern neighbour.  Pakistan imported $514m worth of arms from China last year, according to data from the Stockholm International Peace Research Institute, compared with just $21m from the US.

At the same time, however, Mr Trump has also recommitted to the Afghan war, which some military analysts warn will need backing from Islamabad to be successful


Popular posts from this blog

Balochistan to establish first medical university

The Newspaper's Staff CorrespondentOctober 25, 2017QUETTA: The provincial cabinet on Tuesday approved the draft for establishing a medical university in Balochistan.Health minister Mir Rehmat Saleh Baloch made the announcement while speaking at a press conference after a cabinet meeting.“The cabinet has approved the draft of the medical university which would be presented in the current session of the Balochistan Assembly,” he said, adding with the assembly’s approval the Bolan Medical College would be converted into a medical university.Published in Dawn, October 25th, 2017

China’s 'Digital Silk Road': Pitfalls Among High Hopes

Will information and communication technologies help China realize its Digital Silk Road?By Wenyuan WuNovember 03, 2017In his speech at the opening ceremony of China’s 19th Party Congress, President Xi Jinping depicted China as a model of scientific and harmonious development for developing nations. Xi’s China wants to engage the world through commerce but also through environmental protection and technological advancement. This includes Beijing’s efforts to fight climate change with information and communication technologies (ICTs) that it plans to export along its “One Belt One Road” initiative (OBOR). Xi may have ambitious plans, but could China be throwing up obstacles in its own way?In his speech, the Chinese president emphasized the need to modernize the country’s environmental protections. The Chinese state is taking an “ecological civilization” approach to development and diplomacy, with a natio…

Germany’s Siemens sets up Belt and Road office in Beijing
Germany’s Siemens sets up Belt and Road office in Beijingby Janne Suokas Mar 23, 2018 15:20 TRADEINVESTMENTBELT AND ROAD INITIATIVEGerman industrial and engineering group Siemens will set up a Belt and Road office in Beijing. surberFlickrCC BY 2.0
German industrial and engineering group Siemens will set up an office in Beijing to boost international cooperation under China’s Belt and Road initiative, the company said on Friday.The move will help strengthen Siemens’ cooperation with Chinese and international companies and expand business opportunities brought about by the Belt and Road initiative, according to the company’s statement.The Belt and Road initiative is China’s ambitious project to boost trade and infrastructure investment in more than 65 countries along the ancient Silk Road trade routes from Asia to Europe and Africa.Siemens said it had already partnered with hundreds of Chinese companies in overse…