Pakistan's China debt at $6.6 billion in past 10 months; funds mostly used on two nuclear plants

The debt owed by Pakistan to China has been pegged at $6.56 billion for the July-April period, equal to three-fourths of the total $8.6 billion worth loans that Islamabad received in the past 10 months. 

The Pakistan government, headed by Prime Minister Imran Khan, has disclosed for the first time the debt quantum that it received from all-weather friend China, likely under pressure from the International Monetary Fund (IMF), ET has learnt. 

These loans are for the Karachi nuclear power plants, known as K2 and K3, and China SAFE deposits. SAFE is the State Administration of Foreign Exchange, China’s foreign exchange regulatory agency. 

Pakistan has long been using Chinese money to shore up its official forex reserves, but it is for the first time that Chinese deposits with the central bank have been made part of the Ministry of Finance’s debt statistics, ET has learnt. Separately, the decision to disclose Chinese SAFE deposits was taken by Dr Abdul Hafeez Shaikh, the adviser to the Prime Minister on finance, according to Express Tribune. 

The full disclosure of Chinese loans was a sticky point in negotiations between the Pakistan government and the IMF regarding a $6-billion bailout package. Imran Khan has apparently accepted the IMF’s terms on the Chinese loans. IMF is against Pakistan using its funds to repay Chinese loans. 

Out of the $6.5-billion loans from China, $2 billion was in SAFE deposits and $2.53 billion in foreign commercial loans, to cushion declining forex reserves. In March, China provided the loans via two commercial banks. China Development Bank gave $2.24 billion as a short-term loan, while Industrial and Commercial Bank of China disbursed $300 million.

China gave $628.4 million for the construction of two ongoing nuclear power plants in the past 10 months, Pakistan finance ministry statistics revealed.

China also gave $1.4 billion in project financing in the past 10 months, largely for projects that form part of the China-Pakistan Economic Corridor (CPEC). Project loans have largely been disbursed for the Sukkur-Multan motorway, Havelian-Thakot project of the CPEC and the Lahore Orange Line project.

Every government in Pakistan has been heavily relying on foreign loans to stay afloat. The reliance on China increased in recent years after the traditional multilateral lenders stopped budgetary support due to deterioration in macroeconomic conditions, experts said.
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