The FINANCIAL — Pakistani Prime Minister Imran Khan and Chinese President Xi Jinping are due to meet in Beijing on November 2 as Pakistan faces a debt crisis and is looking to Beijing for additional financial support.
Pakistan already has taken out billions of dollars in loans from China in recent years to finance big infrastructure projects, including a major new Pakistani port and transport and energy links that are part of Xi’s Belt and Road initiative, according to RFE/RL.
China has in total pledged more than $60 billion to Pakistan in the form of loans and investments for roads, ports, power plants, and industrial parks.
In response to its debt crisis, Pakistan is seeking an emergency bailout loan of $8 billion from the International Monetary Fund, which is sending a team to Pakistan to assess the situation next week.
To limit how much it borrows from the IMF, Islamabad also is seeking new loans from Saudi Arabia and China, discussion of which is expected to dominate Khan’s visit to Beijing.
Looming in the background are objections raised by the United States to any move by the IMF to provide Pakistan with loans that would be used to essentially refinance its debt to China. Washington holds the largest voting share at the IMF and strongly influences decisions by the international lender of last resort.
China and Pakistan refer to themselves as “all-weather friends.” They have a common rival — India — and have built a web of military, political, and economic links over the years.
Pakistan has been among the most enthusiastic supporters of Xi’s Belt and Road projects, which seek to reestablish China as the center of global trade by rebuilding and expanding economic and transportation links with Europe, Africa, the Middle East, and South Asia.
Pakistan’s financial crisis put Khan under pressure from the day he took office in July. He has had to deal with increasingly unsustainable debts, trade deficits, a plummeting currency, and public anger over the rising prices of basic goods.
Khan initially vowed to curb borrowing but was forced by the burgeoning crisis this month to seek another round of bailout loans from the IMF.
As an opposition politician, the former cricket star had questioned whether Islamabad’s partnership with China benefited Pakistan. Since taking office, his administration has been reassessing some aspects of the China-Pakistan Economic Corridor, including scaling back the development of Pakistan’s Arabian Sea port of Gwadar.
But Khan has softened some previous criticisms of the Chinese-backed projects and his Finance Minister Asad Umar has said a review of contracts signed by the previous government has so far turned up no irregularities.
Other countries, including Malaysia, also have pulled back on Chinese-funded projects and much concern has been raised over the case of Sri Lanka.
That Indian Ocean island nation’s government borrowed billions from China to build a port and airport. But when it was unable to make payments, it signed an agreement giving a Chinese company an 80 percent stake and a 99-year lease on the failing port, according to RFE/RL.
Chinese Foreign Ministry spokesman Lu Kang on October 31 said that the economic projects in Pakistan remain “mutually beneficial”and will “play an important role in improving people’s livelihood and promoting economic development.”
Lu claimed that Pakistan doesn’t see the projects as major contributors to the “financial difficulties it faces currently.”