China’s loan deferment deepens its economic grip on Pakistan, bolstering strategic ties as Islamabad scrambles for global financial lifelines
News Desk
BEIJING: China has provided Pakistan with critical financial breathing space by extending the repayment period of a $2 billion loan by one year, a move that offers much-needed relief to the country’s fragile economy. The finance ministry confirmed the extension on Saturday, stating that the loan, which was originally due for repayment on March 24, has been deferred to help Pakistan maintain economic stability.
In an official statement, the ministry emphasized the significance of this extension, noting that it would assist in maintaining foreign exchange reserves and strengthening overall financial stability. Given Pakistan’s ongoing economic challenges, including a persistent balance of payments crisis, the relief provided by China is expected to ease immediate repayment pressures and allow the government to focus on broader economic recovery measures.
China has remained one of Pakistan’s most crucial economic allies, offering consistent financial support and investing heavily in development projects under the China-Pakistan Economic Corridor (CPEC). The latest loan deferment further reinforces Beijing’s strategic economic partnership with Islamabad, especially at a time when Pakistan is engaged in talks with international financial institutions to secure further assistance.
The loan extension coincides with Pakistan’s ongoing discussions with the International Monetary Fund (IMF) regarding the first review of its $7 billion Extended Fund Facility (EFF), which was secured last year. Earlier this week, an IMF delegation led by Nathan Porter arrived in Islamabad for negotiations with Finance Minister Muhammad Aurangzeb and other key officials. These talks are focused on assessing Pakistan’s macroeconomic situation, revenue collection efforts, and structural reform progress.
During the discussions, Finance Minister Aurangzeb reaffirmed Pakistan’s commitment to fiscal discipline and meeting the IMF’s economic reform conditions. The government is under pressure to demonstrate progress on revenue generation, subsidy reduction, and economic restructuring to ensure continued IMF support.
While the IMF review is crucial for Pakistan’s long-term economic outlook, China’s decision to extend the loan repayment provides immediate relief, helping to stabilize foreign reserves and sustain confidence in the country’s financial standing. However, analysts caution that while such deferments offer short-term respite, Pakistan must work towards deeper economic reforms to reduce its reliance on external financing and ensure sustainable economic growth.
